Response to the following problem:
Choose a high-growth managed fund and a defensive managed fund. Find and record their closing net asset values at the end of each week for the immediate past year. Assume that you wish to invest $10 400.
a. Assume you use dollar-cost averaging to buy units (shares) in both the high-growth and the defensive funds by purchasing $100 of each of them at the end of each week-a total investment of $10 400 (52 weeks x $200/week).
How many units would you have purchased in each fund by year-end?
What are the total number of units, the average cost per unit, and the year-end portfolio value of each fund?
Total the year-end fund values and compare them to the total that would have resulted from investing $5200 in each fund at the end of the first week.
b. Assume you use a constant-dollar plan with 50% invested in the high-growth fund (speculative portion) and 50% invested in the defensive fund (conservative portion). If the portfolio is rebalanced every time the speculative portion is worth $500 more or $500 less than its initial value of $5200, what would be the total portfolio value and the number of shares in the speculative portion at year-end?