WITH SOLUTION PLS 2. My. Sy wants to find a new investment for his portfolio. He is looking for a safe investment that providesstable returns. He considers the following options for investment:Stocks: He was offered a stock of ABC Corp. It is a mature company with strong operational andfinancial performance. The volatility (standard deviation or sd) of the stock is 10% and theexpected return (mean) is 14%Exchange-Traded Fund(ETF): The ETF with strong financial performance offers an expectedreturn (mean) of 13% with a volatility (standard deviation or sd) of 7%Bonds: Bonds with excellent credit ratings offer an expected return of 3% with 2% volatility.Question: What do you think is the most suitable investment opportunity for Mr. Sy? Why? Show yoursolution.Note: In order to select the most suitable investment opportunity, you have to calculate the coefficient ofvariation for each option usingvolatility 100%lexpected return)where volatility is the standard deviation and expected return is themeanRemember: In finance, the coefficient of variation allows investors to determine how much volatility, or risk, is assumed incomparison to the amount of returm expected from investments. The lower the coefficient of variation, the better the investmentopportunity.

The coefficient of variety (CV) is the proportion of the standard deviation to the mean. The higher…

financial performance. The volatility (standard deviation or sd) of the stock is 10% and the expected return (mean) is 14% Exchange-Traded Fund(ETF): The ETF with strong financial performance offers an expected return (mean) of 13% with a volatility (standard deviation or sd) of 7% Bonds: Bonds with excellent credit ratings offer an expected returm of 3% with 2% volatility. Question: What do you think is the most suitable investment opportunity for Mr. Sy? Why? Show you solution. Note: In order to select the most suitable investment opportunity, you have to calculate the coefficient of variation for each option using volatility expected return. where yolatility is the standard deviation and expected return is the 100% mcan Remember: In finance, the coefficient of variation allows investors to determine how much volatility, or risk, is assumed in comparison to the amount of return expected from investments. The lower the coefficient of variation, the better the investmen opportunity.

financial performance. The volatility (standard deviation or sd) of the stock is 10% and the expected return (mean) is 14% Exchange-Traded Fund(ETF): The ETF with strong financial performance offers an expected return (mean) of 13% with a volatility (standard deviation or sd) of 7% Bonds: Bonds with excellent credit ratings offer an expected returm of 3% with 2% volatility. Question: What do you think is the most suitable investment opportunity for Mr. Sy? Why? Show you solution. Note: In order to select the most suitable investment opportunity, you have to calculate the coefficient of variation for each option using volatility expected return. where yolatility is the standard deviation and expected return is the 100% mcan Remember: In finance, the coefficient of variation allows investors to determine how much volatility, or risk, is assumed in comparison to the amount of return expected from investments. The lower the coefficient of variation, the better the investmen opportunity.

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter2: Fundamental Economic Concepts

Section: Chapter Questions

Problem 6E

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K To get the maximum benefit of diversification, an investor should OA. include in his portfolio stocks whose returns are not correlated with each other OB. include in his portfolio stocks whose returns are positively correlated with each other OC. include only one stock in his portfolio. OD. include in his portfolio stocks whose returns are negatively correlated with each other
QUESTION 2 Elizabeth has decided to form a portfolio by putting 30% of her money into stock 1 and 70% into stock 2. She assumes that the expected returns will be 10% and 18%, respectively, and that the standard deviations will be 15% and 24%, respectively. Describe what happens to the standard deviation of the portfolio returns when the coefficient of correlation ρ decreases. The standard deviation of the portfolio returns decreases as the coefficient of correlation decreases. The standard deviation of the portfolio returns increases as the coefficient of correlation increases. The standard deviation of the portfolio returns decreases as the coefficient of correlation increases. The standard deviation of the portfolio returns increases as the coefficient of correlation decreases.
An investor allocates $30,000 and $50,000 to two assets (A1 and A2). These assets generate 5% and -4.5% rate of returns, respectively. She allocates the remaining 50% of her portfolio to an asset (A3), which provides 4.5% rate of return. Calculate the portfolio's rate of return.
You plan to invest $1,000 in a corporate bond fund or in a common stock fund. The following table represents the annual return (per $1,000) of each of these investments under various economic conditions and the probability that each of those economic conditions will occur. Compute the expected return for the corporate bond and for the common stock fund. Show your calculations on excel for expected returns. Compute the standard deviation for the corporate bond fund and for the common stock fund. Would you invest in the corporate bond fund or the common stock fund? Explain. If choose to invest in the common stock fund and in (c), what do you think about the possibility of losing $999 of every $1,000 invested if there is depression. Explain.
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QUESTION 1 Elizabeth has decided to form a portfolio by putting 30% of her money into stock 1 and 70% into stock 2. She assumes that the expected returns will be 10% and 18%, respectively, and that the standard deviations will be 15% and 24%, respectively. Compute the standard deviation of the returns on the portfolio assuming that the two stocks' returns are uncorrelated. 17.4%. 27.4%. 7.4%. 11.4%. QUESTION 2 Elizabeth has decided to form a portfolio by putting 30% of her money into stock 1 and 70% into stock 2. She assumes that the expected returns will be 10% and 18%, respectively, and that the standard deviations will be 15% and 24%, respectively. Describe what happens to the standard deviation of the portfolio returns when the coefficient of correlation ρ decreases. The standard deviation of the portfolio returns decreases as the coefficient of correlation decreases. The standard deviation of the portfolio returns increases as the coefficient…
Given the following information, what is the standard deviation of the returns on a portfolio that is invested 35 percent in both Stocks A and C, and 30 percent in Stock B? (see attached chart)
"A financial investor has $31,000 to invest. The choices have been narrowed down to the following two options.-OPTION 1:Invest in a foreign bond that will mature in one year. This will entail an immediate brokerage fee of $100. For simplicity, assume that the bond will provide interest of $2,470, $2,130, or $1,527 over the one-year period and that the probabilities of these occurrences are assessed to be 0.29, 0.43, and 0.28, respectively.-OPTION 2:Invest in a $31,000 certificate with a savings-and-loan association. Assume that this certificate has an effective annual rate of 5.6%.Which form of the investment should the investor choose in order to maximize her expected financial gains? Enter the expected net gain (total return - initial investment - fee) of the preferred option."
The return on stock A is 13 if the economy is good and 01 if the economy is bad. The return on stock B is .09 ifr the economy is good and.05 if it is bad. The probability of a good economy is 50% and the probability of a bad economy is also 50%. Find the standard deviation for a portfolio invested 75% in A and 25% in B. O.04 O.05 O.06 O.07
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