As you know, one of the many services offered by Oracular Consulting is financial planning. We have recently acquired two new clients. The financial planning department has pre-filtered the current market and provided a list of ten (10) stocks that have been performing well in recent months. The data on these stocks for the last three years is provided in the attached file, presented as frequency data based on the number of days the stock provided a particular daily return.

The two clients are quite different. Client A is young and energetic. She has a long time before retirement, and is willing to take risks in order to gain a lot. Client B is older and has much less time before retirement. He needs a stock portfolio that will provide income in his retirement, so he is not willing to accept a lot of risk, but he of course would like a steady return. Both clients recognize the need to diversify their portfolio in order to plan for the future.

Using the frequency data provided, fill out a chart like the one below to help present the data to the clients in a convenient, easy-to-compare format. Then put together two portfolios, one for each client, composed of 4 stocks, showing the percentage of the investment in each of the stocks in the portfolio. Justify your choices carefully, and provide the clients with both an estimated rate of return for their portfolio and a range of possible returns that they can reasonably expect. To estimate the range of likely returns, simply use the high and low expected values for each stock in the portfolio, weighted by the percentage of the investment in that stock.

Attachment: Data file C06 StockPerformance.xls [.rda]