I. Consider a risky asset X. We suppose that the rate of return of the asset per year was observed as follows: year 2006 2007 2008 | 2009 2010 Rate of return 4.8% 3.3% -0.5% 2.4% | 0% (a) Answer the average of the rate of return in the above past 5-year data. (1) (1) 1.8% (2) 2.0% (3) 2.2% (4) 2.4% (5) 2.6% (b) Answer the standard deviation of the above data by rounding it off to two decimal places. Note that the bottom of the fraction in the definition of the standard deviation should be 4 here. [2] (1) 1.98% (2) 2.12% (3) 2.23% (4) 2.34% (5) 2.45 % (c) In addition to X, suppose another risky asset Y is available. The expected rate of return is 8% per year. When you invest into both X and Y by mixing 2 parts X with 1 part Y, what is the expected rate of return of the portfolio per year? [3] (3) 4.0% (1) 2.0% (2) 3.0% (4) 5.0% (5) 6.0 %
I. Consider a risky asset X. We suppose that the rate of return of the asset per year was observed as follows: year 2006 2007 2008 | 2009 2010 Rate of return 4.8% 3.3% -0.5% 2.4% | 0% (a) Answer the average of the rate of return in the above past 5-year data. (1) (1) 1.8% (2) 2.0% (3) 2.2% (4) 2.4% (5) 2.6% (b) Answer the standard deviation of the above data by rounding it off to two decimal places. Note that the bottom of the fraction in the definition of the standard deviation should be 4 here. [2] (1) 1.98% (2) 2.12% (3) 2.23% (4) 2.34% (5) 2.45 % (c) In addition to X, suppose another risky asset Y is available. The expected rate of return is 8% per year. When you invest into both X and Y by mixing 2 parts X with 1 part Y, what is the expected rate of return of the portfolio per year? [3] (3) 4.0% (1) 2.0% (2) 3.0% (4) 5.0% (5) 6.0 %
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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![I. Consider a risky asset X. We suppose that the rate of return of the
asset per year was observed as follows:
2008 2009 2010
Rate of return 4.8% 3.3% -0.5% 2.4% 0%
year
2006 2007
(a) Answer the average of the rate of return in the above past 5-year
data. (1)
(1) 1.8%
(2) 2.0%
(3) 2.2%
(4) 2.4%
(5) 2.6%
(b) Answer the standard deviation of the above data by rounding it
off to two decimal places. Note that the bottom of the fraction
in the definition of the standard deviation should be 4 here. [2]
(1) 1.98% (2) 2.12%
(3) 2.23% (4) 2.34% (5) 2.45 %
(c) In addition to X, suppose another risky asset Y is available.
The expected rate of return is 8% per year. When you invest
into both X and Y by mixing 2 parts X with 1 part Y, what is
the expected rate of return of the portfolio per year? [3]
(3) 4.0%
(1) 2.0%
(2) 3.0%
(4) 5.0%
(5) 6.0 %
(d) Which is the standard deviation of asset Y most likely to be in
the above portfolio? (4]
(1) –4.0%
(2) –2.0%
(3) 0%
(4) 2.0%
(5) 4.0%
(e) Imagine that you invest $500 in a stock whose dividend is $2
every year. You finally sell it at $494 three years after. Note
that you get the dividend three times. Answer how much the
rate of (total) return is. [5]
(1) About -1.2%
(2) 0.0%
(3) about 1.0%
(4) About 2.4%
(5) About 2.5 %
(f) Suppose you deposit $1000 now and then $2000 a year from now.
How much will you have two years from now, if the interest rate
is 10% per year. (6)
(1) $3000
(2) $3300
(3) $3410
(4) $3520
(5) $3630](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F1077e2db-e230-4539-af72-4ff36b7e393b%2F439aee25-e23b-408c-9c9b-6c8d54622213%2Fz1n78y8_processed.jpeg&w=3840&q=75)
Transcribed Image Text:I. Consider a risky asset X. We suppose that the rate of return of the
asset per year was observed as follows:
2008 2009 2010
Rate of return 4.8% 3.3% -0.5% 2.4% 0%
year
2006 2007
(a) Answer the average of the rate of return in the above past 5-year
data. (1)
(1) 1.8%
(2) 2.0%
(3) 2.2%
(4) 2.4%
(5) 2.6%
(b) Answer the standard deviation of the above data by rounding it
off to two decimal places. Note that the bottom of the fraction
in the definition of the standard deviation should be 4 here. [2]
(1) 1.98% (2) 2.12%
(3) 2.23% (4) 2.34% (5) 2.45 %
(c) In addition to X, suppose another risky asset Y is available.
The expected rate of return is 8% per year. When you invest
into both X and Y by mixing 2 parts X with 1 part Y, what is
the expected rate of return of the portfolio per year? [3]
(3) 4.0%
(1) 2.0%
(2) 3.0%
(4) 5.0%
(5) 6.0 %
(d) Which is the standard deviation of asset Y most likely to be in
the above portfolio? (4]
(1) –4.0%
(2) –2.0%
(3) 0%
(4) 2.0%
(5) 4.0%
(e) Imagine that you invest $500 in a stock whose dividend is $2
every year. You finally sell it at $494 three years after. Note
that you get the dividend three times. Answer how much the
rate of (total) return is. [5]
(1) About -1.2%
(2) 0.0%
(3) about 1.0%
(4) About 2.4%
(5) About 2.5 %
(f) Suppose you deposit $1000 now and then $2000 a year from now.
How much will you have two years from now, if the interest rate
is 10% per year. (6)
(1) $3000
(2) $3300
(3) $3410
(4) $3520
(5) $3630
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