Jacob RRSP is currently valued at $200,000. His asset allocation is 10% liquid a

Question

Jacob RRSP is currently valued at $200,000. His asset allocation is 10% liquid assets, 40% fixed income and 50% equity. For every change in interest rates of 1%, the fixed income portion of Philip's portfolio would change by 2%. The dividend yield on the equity portion of his portfolio is 2.75%.

a)Is this asset allocation appropriate for Jacob who will retire in 10 years?

b)If interest rates rise by 2%, what will be the change in the fixed income component of Jacobs portfolio? What type of risk would this change exemplify?

c)How much dividend income would Jacob earn on his RRSP portfolio? Would he declare this income for tax purposes?

Explanation / Answer

a. yes

b. the change in the fixed income will be by 4%..this type of change will exemplify interest rate risk.

c. dividend income=2750..no he should not declare this for income tax purpose.

Related Questions

Navigate

• Browse (All)
• Browse J
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.