You, the manager of a UK-based hedge fund, must build a small portfolio. You need to construct a balanced portfolio of equities and bonds. Your portfolio must include equities from three different companies and three different bonds. Bonds may be either government or corporates. You are borrowing 12,000,000 for four weeks at the rate LIBOR + 2.25%. This is an annual quote. Your objective as portfolio manager is to produce a fund that should deliver an annualised return of at least 10%. No short-selling nor use of other funds is allowed. Your holding period is four weeks (be sure to annualise your four week return). The specific start and end date of the investment period is to be decided by the hedge fund manager. Trading is allowed during the holding period. Assume short term taxes & transaction costs are both zero.
