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Lecture 5

ADMS 4501 Lecture 5: Asset Allocation- Review Question 2

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Administrative Studies
Course Code
ADMS 4501
Lois King

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Asset Allocation – Review Question 2 Jessica is a 45-year old professional who recently left her old firm where she had worked for the past fifteen years as an Information Technology (IT) lawyer. She walked away from a high-paying salary ($300,000) to start her own consulting business. Her new business will provide IT legal advice to large Canadian financial corporations, focusing on privacy and security issues. She currently has no debts or mortgage. Her RRSP is currently worth $120,000 (but down from a value of $200,000 one year ago) and is 100% invested in one mutual fund, which invests only in Canadian technology stocks. Outside her RRSP, she has over $800,000 in a portfolio of six publicly-listed financial Canadian companies, some of which will become her clients next year. The recent performance of this portfolio has been very good, earning a total return of 6.5% last year. She owns her own home in central Toronto which is conservatively worth $1,000,000. She is a single mother with two children, ages 10 and 12. She estimates that she has enough clients lined up to generate a minimum pre-tax consulting income of $60,000 next year. However, this amount will not be enough to pay her household expenses and pay alimony to her unemployed ex-hus
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