Choosing Investments!

1
Giving Financial Advice
MA 110 Istructor L.Desir
2
Choosing Investments!
Part I

• For Mr. Robert Carter
• Regarding 10,000 investment in up to five
  different types of stocks.
• From Revi Shefi, financial analyst

3
So, How Many Ways to Invest?

• You have requested for me to choose five stocks
  for you out of the following categories
• 20 - Low risk
• 15 - Medium risk
• 10 - High risk
• 1) I figured out that you have 1,221,759 ways
  to invest your money.
• Firstly, lets look at the sum the amount of
  the stocks that you want to choose from
  20(L)15(M)10(H)45
• Secondly, from them you wanted to choose
  only 5 45C5 1,221,759 (no matter the order).

4
When Each One Is different?

• 2) The ways areOne low risk 20C120
• Three medium risk 15C3455
• One high risk 10C110
• 204551091,000 ways.

The chances are (0.744) 74.4 (20C1)(15C3)(10C1
) 45C5
5
The chances to get at least one high risk stock
are 73.4 (89,7127 ways)
Question 3

• 35C410C1
• 35C310C2
• 35C210C3
• 35C110C4
• 35C010C5

89,712745C5 (0.734) 73.4
6
Assessing the Return
Part II

• XLow - the annual yield 6
• YMedium - the annual yield 7
• ZHigh - the annual yield 8

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Question 4

• -1/2LM-1/2H0
• LMH10,000
• 0.06L0.07M0.08H650
• X A¹ B
• Low risk stocks 5,833.16
• Medium risk stocks 3,333.34
• High risk stocks 833.5

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Question 5

• When you investment is two thirds of the total
  annual return
• LMH10,000
• -2/3LM-2/3H0
• L0.06M0.07H0.08650

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Question 5 (cont.)
X A¹ B Low 5,500 Medium 4,000 High 500
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Maximizing the Return
Part III
1) X gt Y1,200 2) XY gt 6,000 YZ gt
4,500 YXZ 10,000 Z 10,000-X-Y
Y10,000-X-Y gt 4,500 3) X gt 5,500

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6) If you listen to your wife, you should expect
to earn maximum return of 725 per year.
(5,500 , 4,300) 10,000 4,300 5,500
200(5,500 , 500) 10,000 5,500 500
4,500(3,600 , 2,400) 10,000 2,400 3,600
4,000 R 0.06 5,500 0.07 500 0.08
4,500 725
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• 7) Your investments in each type would be

• Low risk stocks L 5,500
• Medium risk stocks M 4,500
• High risk stocks H 500

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Giving Generously

• Mr. Carter- Montgomery College is grateful for
  your generosity and would like to thank you in
  advance for the money that you will donate after
  35 years of investing.

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Your deposit every year
10,000 / 3 3,333,33 3,333,33 0.06
200 3,333,33 0.07 233.33 3,333,33 0.08
266.66 200 233.33 266.66 699.99 every year

• 8) You will deposit every year, for the next 35
  years 699.99 a year.

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What will happen until you turn 65?

• I 4.5
• N 35
• P/y 1
• C/y 1
• PMT - 699.99
• PV 0

FV ? FV 57,046.81
After 35 years your invested stocks will be
57,046.81
9) 57,046.81/2 28,523.40 dollars When
you will get all of your money after 35 years,
you will give half to Montgomery College.
This will be 28,523.40.
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Question 10

• N ?
• I 4.5
• The gift(PV) 28,523.40
• FV 0
• PMT -1500
• P/Y 1
• N (43.98) 44 years

The College will be able to award that
scholarship for 44 years.
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Question 11

• N 100
• I 4.5
• PV 28,523.40
• PMT ?
• FV 0
• P/Y 1
• PMT 1,299.5

The scholarship for 100 years would be in the
amount of 1,299.5
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Question 12

• N ?
• I 5.26
• PV 28,523.40
• PMT -1500
• FV 0
• P / Y 1
• N no solution

?
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Why there is no solution?
No solution with negative ln
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The End