Assume you have two assets A and B. You know the expected return and standarddeviation of returns for each asset. This information is shown in the table below.You plan to put 50% of your wealth into each assets. What would the expectedreturn be for the portfolio?AssetAB0.030.270.1350.15returns12%15%standarddeviations20%40%

Expected return on a portfolio is the rate of return that is required to generate from the…

Answered: You plan to put 50% of your wealth into…

You plan to put 50% of your wealth into each assets. What would the expected return be for the portfolio? Asset A B 0.03 0.27 0.135 0.15 returns 12% 15% standard deviations 20% 40%

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

See similar textbooks

Related questions

Q: Please explain with details also explain wrong options A Treasury bond has an 8% annual coupon and…

A: A bond will be selling at its par value if its Coupon rate = yield to maturityA bond will be selling…

Q: A pension fund manager is considering three mutual funds. The first is a stock fund, the second is a…

A: To find the proportions of each asset in the optimal risky portfolio and the corresponding expected…

Q: Select all that are true with respect to the adjusted present value (APV) DCF methodology. Group of…

A: Stock valuation is the process of determining the intrinsic value of a company's stock and various…

Q: Dave borrowed $440 and paid $44 in interest when he repaid the principal after one year. The lender…

A: The effective cost of a loan refers to the total cost that a borrower will incur over the life of…

Q: Andrew bid $32.50 per share for 500 shares in a Dutch auction for Vargas Resorts shares of stock.…

A: In a Dutch auction, the price paid by all winning bidders is based on the lowest accepted bid. To…

Q: Suppose you are 35 and have a $105,000 face amount, 15-year, limited-payment, participating policy…

A: As per the given information:To determine:The net cost of insurance

Q: What is the value of a new $1,000 par value bond

A: Price of the bond is the PV of all future coupons and par value discounted at the YTM. Now in this…

Q: You paid cash for $1,600 worth of stock a year ago. Today the portfolio is worth $2,626. a. What…

A: First I'm going to list the formula and then solve it in Excel.In margin trading, you purchase a…

Q: Year Return 1 -3.5% 2 27.9% 3 12.5% 3.6%

A: Stock returns:Stock returns refer to the financial gains or losses that an investor experiences…

Q: 22) You invested $105,000.00 in Quandary Company, Inc. on January 1, 2015. On December 31 of 2022…

A: Compounded annual growth rate (CAGR) or geometric average rate of return is the rate of return that…

Q: Problem 6-18 Project NPV Imperial Motors is considering producing its popular Rooster model in…

A: Initial cost = CNY4.8 billionSalvage value= CNY508 millionTax rate= 25%Required return= 14%Inflation…

Q: Raiders Restaurant is considering the purchase of a $10,000,000 flat-top grill. The grill has an…

A: Operating cash flow is that amount of profit which is earned by the investor from the project. It…

Q: 3) Two investment options are analyzed against each other. They both have an internal rate of return…

A: NPV is also known as Net Present Value. It is a capital budgeting technique which helps in decision…

Q: Peyton Manufacturing is trying to decide between two different conveyor belt systems. System A costs…

A: EAC or equivalent annual cost is the annual cost of owning and maintaining the asset over its entire…

Q: the new value of the bond will be approximately

A: We can determine the new price of the bond using the formula below:Bond prices and yield have an…

Q: Determine the effective annual yield for each investment. Then select the better investment.…

A: Effective Annual Yield is that rate of return which is earned by the investor effectively after…

Q: Employee's Rates • 7.65% on first $118,500 of income . 1.45% on income above $118,500 2016 FICA Tax…

A: FICA taxes, or the Federal Insurance Contributions Act taxes, are a type of payroll tax that fund…

Q: tsche Transport can lease a truck for four years at a cost of €32,000 annually. It can instead buy a…

A: Cost of buying=€82,000Salvage value after 4 years= €21,500Annual maintenance=€12,000Discount…

Q: Your company is analyzing two machines to determine which one it should purchase. Whichever machine…

A: NPV is also known as Net Present Value. It is a capital budgeting technique which helps in decision…

Q: A firm has a P/E ratio of 15 and a stock price of $35 per share. If their profit margin is 10% and 1…

A: First we need to use PE ratio for calculation of net income.P/E ratio =Net income/Equity…

Q: The yield on a one-year Treasury security is 5.8400%, and the two-year Treasury security has a…

A: As per Q&A guidelines, The first question should be answered when multiple questions posted…

Q: Landman Corporation (LC) manufactures time series photographic equipment. It is currently at its…

A: Net present value (NPV):Net Present Value (NPV) is a financial metric that calculates the…

Q: Assume the following inputs for a call option: (1) current stock price is $29, (2) strike price is…

Q: Initial sale price of common stock Hudson-Perry Recordings Inc has one issue of preferred stock and…

A: We need to calculate intrinsic value of shares which will be the price of stock. We need to deduct…

Q: A stock currently sells for $20 per share and pays $1 per year in dividends. What is an investor's…

A: The process of assessing the intrinsic or fair worth of a company's shares on the stock market is…

Q: You purchased a bond at a price of $2,100. In 30 years when the bond matures, the bond will be worth…

A: Rate of return is amount of profit earned on investment based on initial investment.Purchase price…

Q: Determine the following probabilities for a binomial distribution. a. For n=3 and = 0.11, what is…

A: P(X= r) = n * pr* q(n-r)

Q: Assume that Novak Corp. uses a periodic inventory system and has these account balances: Purchases…

A: Net purchases refers to the total value of goods and services purchased by a business, after…

Q: Lauren Corporation will pay a dividend of $4.00 next year. The company has stated that it will…

A: According to Gordon's growth model ,Po = wherePo= price of stockD1 = Expected Dividendr =Required…

Q: On the London Metals Exchange, the price for copper to be delivered in one year is $5,500 a ton.…

A: It represents both the inflow as well as outflow of the amount from the organisation is termed cash…

Q: Milton Industries expects free cash flows of $19 million each year. Milton's corporate tax rate is…

A: Given:ParticularsAmountFree cash flows$19MillionTax rate22%Unlevered cost of capital…

Q: Suppose we observe the following rates: 1R₁ = 0.80%, 1R₂ = 1.25%, and E(271) = 0.941%. If the…

A: Variables in the question: 1R1=0.80% =0.0081R2=1.25% =0.0125E(2r1)=0.941% =0.00941

Q: A common stock currently has a beta of 1.7, the risk-free rate is 5 percent annually, and the market…

A: According to Capital asset pricing model ,k = Rf+[b*(Rm-rrf)]where,k = Required rate of returnRf=…

Q: M eBook One year ago, Henderson Honey issued a 15-year bond for $1,000. The bond's coupon rate of…

A: A bond's current yield is calculated dividing the coupon interest by the current market price of the…

Q: onsider the following projects: Project Cash Flows ($) C0�0 C1�1 C2�2 C3�3 C4�4 C5�5 A −2,600 2,600…

A: Capital budgeting is used to determine which projects should be selected and which projects should…

Q: a. If the new machine is purchased, what is the amount of the initial cash flow at Year 0 after…

A: Capital budgeting is a critical financial process that involves evaluating and making decisions…

Q: Harvey Gorman expects earnings of $93.0 million at the end of the year (at t=1) and to pay dividends…

A: Dividend discount modelIt is used to calculate the value of equity. The sum of the present value of…

Q: In response to customer complaints about rising prices of food items a supermarket responds by…

A: Coupons are the discounts given to customers to promote the sales of the company and this is one way…

Q: Dividend constraints The Howe Company's stockholders' equity account is as follows: The earnings…

A: Maximum Dividend per share is the highest amount a company can distribute to its shareholders for…

Q: How does the WACC DCF methodology mechanically incorporate interest tax shields (select the best…

A: The correct answer is "By estimating a discount rate that incorporates the tax benefits of debt."In…

Q: (a) How much (in $) would the account be worth after 10 years? $ (b) How much (in $) would the…

A: Since you have posted a question with multiple sub-parts, we will solve the first three sub-parts…

Q: Company A has 279,000 basic shares outstanding and 26,000 outstanding options and warrants. The…

A: Fully diluted shares include covertly preferred stocks, or stocks that can be claimed through…

Q: Common predatory mortgage lending practices include: (select all that apply) Question 4 options:…

A: Predatory mortgage lending practices are unethical tactics used by some lenders to exploit…

Q: The most recent financial statements for Cardinal, Incorporated, are shown here: Income Statement…

A: External financing refers to the funds that are generated from outside the business in the form of…

Q: A company issues $20,000,000, 7.8%, 20-year bonds to yield an effective rate 8% on January 1, 2014.…

A: Bond Amortization refers to the payment of principal on a bond along with the interest to be paid on…

Q: Study Abroad: Paris to Moscow. On your summer study abroad program in Europe you stay an extra two…

A: A currency exchange rate is the rate at which one currency can be exchanged for another currency. It…

Q: The authorized common stock of SP Plumbing and Heating company is 150,000. The company's financial…

A: Common shares of the company are the security that it offers to the general public in exchange for…

Q: Natick Industries leased high-tech instruments from Framingham Leasing on January 1, 2024. Natick…

A: Lease:A lease is a legal agreement between two parties, typically a landlord and a tenant, that…

Q: Arbor Systems and Gencore stocks both have a volatility of 41%. Compute the volatility of a…

A: volatility of the portfolio is calculated as follows:-volatility of the portfolio = whereSDa =…

Q: 3.You are given the option of receiving a lump sum of $20,000 now or an annuity of $2000 per year…

A: An annuity is a financial instrument that provides a series of equal payments made at equal…

Question

Assume you have two assets A and B. You know the expected return and standard
deviation of returns for each asset. This information is shown in the table below.
You plan to put 50% of your wealth into each assets. What would the expected
return be for the portfolio?
Asset
A
B
0.03
0.27
0.135
0.15
returns
12%
15%
standard
deviations
20%
40%

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1: Explain the Expected return on portfolio

VIEW

Step 2: Calculate the Expected return for the portfolio

VIEW

Solution

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 3 steps with 2 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.

Similar questions

Use the following table to calculate the expected return from the asset. Return Probability 0.1 0.25 0.2 0.5 0.25 0.25 20.00% 18.75% 17.50% 15.00%
You are going to invest $50,000 in a portfolio consisting of assets X, Y, and Z, as follows; What is the expected return of this portfolio? Calculate the beta coefficient of the portfolio
Suppose you are considering investing your entire portfolio in three assets A, B and C. You expect that after you invest, four possible mutually exclusive scenarios will occur, with associated returns (in %) for each of the three assets as listed below. The probability of each scenario is given below. A B C Probabilities return 0.05 0.50% -3.60% 3.60% 0.35 0.60% 2.75% 0.15% 0.45 3.66% 1.45% 0.45% 0.15 -4.80% -0.60% 6.30% Find the expected returns and standard deviations of Asset A, B & C. (HINT: the expected return is given by the probability-weighted sum of returns in each scenario. The expected standard deviation is given by the square root of the probability-weighted sum of squared deviations from the expected return.) Is there any reason to invest in Asset A given its low expected return and high standard deviation?
Possible returns and their probabilities for an asset is given in the table below. The expected return is 30.25%. Calculate the standard deviation of the asset's return. Probability 0.40 0.45 0.15 13.92% O 17.84 % 18.55% O 19.09% 16.59% Return 0.52 0.17 0.12
Assume that an investor has formed a portfolio of two assets; Asset A and Asset B. if he invested 30% of his wealth in asset A. If the return on asset A is 20% and the return on asset B is 40%, the weight of the wealth invested in asset B is? What is the portfolio return?
Find the expected portfolio return and standard deviation if you were to invest 50% of your portfolio in Asset B, 50% in Asset C, with no allocation to Asset A. Compute your answers to the nearest tenth of a basis point. (See attached data file) We know that Asset A: B: C: expected return: 1.16 1.35 1.38 expected standard deviation: 2.88 1.58 2.19
Now assume that your portfolio only includes a risky asset, Asset C and a risk-free asset, Asset D. If the expected return on Asset D is 18%, the expected return on your po is 12% and the percentage of your wealth allocated to Asset C is 30%, what is the risk-free rate?
e. Calculate the Portfolio Return when you know that its composition is as follows: Asset A: Weight 25%, Return 11% Asset B: Weight 45%, Return 14% Asset C: Weight 30%, Return 16%
Suppose you consider investing some of your wealth in one of three investment portfolios. Your financial adviser provides you with the following table, which gives the probabilities of possible returns from each: Gold Food Automobile Probability Return Probability Return Probability Return 0.2 15% 0.4 15% 0.2 20% 0.3 8.3% 0.6 5% 0.25 12% 0.2 10% 0.25 6% 0.3 5% 0.2 5% 0.10% Which investment should you choose to maximize your expected return: gold, food, or automobile? If you are risk-averse and have to choose between the gold and the food investments, which should you choose? Why? Explain briefly.
Darren is considering the following investments; Alphabet, PayZero and FNQ Res.: Probability of return (%) Likely Return Alphabet (%) Likely Return PayZero (%) Likely Return FNQ Res. (%) 20 6 4 9 30 9 7 14 40 16 10 19 10 18 14 26 a) Calculate the expected return for each asset.b) Calculate the expected return on a portfolio comprising each asset weighted as follows Asset Weighting (%) Weighting (%) Alphabet 20 PayZero 55 FNQ Res. 25 c) Explain to Darren the benefit of combining the assets into a portfolio instead of undertaking individual investments in Alphabet, PayZero and FNQ Res. d) Calculate the risk attached to each of the investments proposed in Alphabet, PayZero and FNQ Res. Rank each investment in regard to its risk and return. Discuss the likely range of returns that could eventuate for each asset with a 95% level of accuracy. ONLY ANSWER PART C AND D PLEASE
Darren is considering the following investments; Alphabet, PayZero and FNQ Res.: Probability of return (%) Likely Return Alphabet (%) Likely Return PayZero (%) Likely Return FNQ Res. (%) 20 6 4 9 30 9 7 14 40 16 10 19 10 18 14 26 a) Calculate the expected return for each asset. b) Calculate the expected return on a portfolio comprising each asset weighted as follows Asset Weighting (%) Weighting (%) Alphabet 20 PayZero 55 FNQ Res. 25 c) Explain to Darren the benefit of combining the assets into a portfolio instead of undertaking individual investments in Alphabet, PayZero and FNQ Res. d) Calculate the risk attached to each of the investments proposed in Alphabet, PayZero and FNQ Res. Rank each investment in regard to its risk and return. Discuss the likely range of returns that could eventuate for each asset with a 95% level of accuracy.
Q5. You are considering two assets with the following characteristics. Return Standard deviation Weights Asset 1 Asset 2 0.15 0.20 0.10 0.20 0.5 0.5 Compute the standard deviation of two portfolios if r1,2 = 0.40 and -0.60, respectively.

SEE MORE QUESTIONS

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS