这道题需要计算3个allocation的expected return吗？

NO.PZ201910090100002107 问题如下 WilliAzarov is a portfolio manager for Westcome Investments, asset management firm. Azarov is preparing for meetings with two of Westcome’s clients anobtains the help of Jason Boulr, a junior analyst. The first meeting is with MaglInc., a rapiy growing US-basetechnology firm with a young workforanhigh employee turnover. Azarov rects Boulr to review the tails of Maglav’s finebenefit () pension plan. The plis overfunanhassets unr management of $25 million. Boulr makes the following two observations:Observation 1 Maglav’s shareholrs benefit from the plan’s overfunstatus.Observation 2 The funratio of Maglav’s plwill crease if employee turnover creases.Magloutsources the management of the pension plentirely to Westcome Investments. The fee structure requires Maglto compensate Westcome with a high base fee regaress of performance. Boulr tells Azarov thoutsourcing offers small institutioninvestors, suMaglav’s pension plan, the following three benefits:Benefit 1: Regulatory requirements are receBenefit 2: Conflicts of interest are eliminatefrom principal–agent issues.Benefit 3: Investors have access to a wir range of investment strategies through scale benefits.In the meeting with Maglav, Azarov scribes the investment approauseWestcome in managing the pension plan. The approais characterizea high allocation to alternative investments, significant active management, ana relianon outsourcing assets to other externasset managers. Azarov also explains thMaglav’s operating results have a low correlation with pension asset returns anththe investment strategy is affectethe faththe pension funassets are a small portion of Maglav’s market capitalization. Azarov states ththe plis subjeto the Employee Retirement Income Security Aof 1974 (ERISanfollows generally accepteaccounting principles, inclung Accounting Stanr Cofication (AS715, Compensation—Retirement Benefits.Azarov’s seconmeeting is with John Spintop, chief investment officer of the Wolf University Enwment Fun(the Fun. Spintop hireWestcome to assist in veloping a new investment polito present to the Funs boarof rectors. The Fun whihassets unr management of $200 million, hoverall objective of maintaining long-term purchasing power while proving neefinancisupport to Wolf University. ring the meeting, Spintop states ththe Funhannuspenng poliof paying out 4% of the Funs three-yerolling asset value to Wolf University, anthe Funs risk toleranshoulconsir the following three liability characteristics:Characteristic 1 The Funheasy access to markets.Characteristic 2 The Funsupports 10% of Wolf University’s annubuet.Characteristic 3 The Funreceives significant annuinflows from gifts annations.The Funha small investment staff with limiteexperienin managing alternative assets ancurrently uses the Norwmol for its investment approach. Azarov suggests a change in investment approamaking allocation to externally man-agealternative assets—namely, hee fun anprivate equity. Ten-yenominexpectereturn assumptions for various asset classes, well three proposeallocations thinclu some allocation to alternative assets, are presentein Exhibit 1.Expecteinflation for the next 10 years is 2.5% annually. Whiproposeallocation in Exhibit 1 woulmost appropriate for the Fungiven its characteristics? A.Allocation 1 B.Allocation 2 C.Allocation 3 C is correct.Allocation 3 is the most appropriate allocation for the Fun The annuexpectereturns for the three allocations are follows:Allocation 1 exp. return = (0.45 × 4.1%) + (0.40 × 6.3%) + (0.10 × 7.5%) + (0.05 × 9.1%)= 5.57%.Allocation 2 exp. return = (0.10 × 4.1%) + (0.15 × 6.3%) + (0.15 × 7.5%) + (0.30 × 5.0%) + (0.30 × 9.1%)= 6.71%.Allocation 3 exp. return = (0.13 × 4.1%) + (0.32 × 6.3%) + (0.40 × 7.5%) + (0.05 × 5.0%) + (0.10 × 9.1%)= 6.71%.The rereturn for Allocation 1 is 3.07% (= 5.57% – 2.50%), anthe rereturn for Allocation 2 anAllocation 3 is 4.21% (= 6.71% – 2.50%).Therefore, Allocation 1 is not appropriate because the expectererate of return is less ththe annuspenng rate of 4%. With expectespenng 4%, the purchasing power of the Funwoulexpecteto cline over time with Allocation 1.Allocations 2 an3 both offer expectererate of return greater ththe annuspenng rate of 4%. Thus, the purchasing power of the Funwoulexpecteto grow over time with either allocation. However, Allocation 3 is more appropriate thAllocation 2 because of its lower allocation to alternative assets (hee fun anprivate equity). The tot60% allocation to alternative assets in Allocation 2 is well above the 15% allocation in Allocation 3 anis likely too high consiring the Funs small investment staff anits limiteexperienwith managing alternative investments. Also, given the Funs relatively small size of assets unr management ($200 million), access to top hee fun anprivate equity managers is likely to limite 正是因为The Funha small investment staff with limiteexperienin managing alternative assets且用的是norwmol。所以Azarov才推荐更多的配置alts。且the fun以参与bt市场，又只支持10%的spenng，还收到很多nation。所以liquity nee，更加能多投alts呀。