Consider the following portfolio of assets: Loan Weight 1 0.30 2 0.70 Expected returni ம σ2 13% 11% 9.06% 82.0% P12=-0.87 8.72% 76.0% 012-75.0% What is the variance of the portfolio (round to two decimals)? Note: a^2 denotes the square of a. For example, 2^2 = 4, 3^2=9 (0.3)^2*(82.0%) + (0.7)^2*(76.0%) + (0.3) (0.7)(-0.87) (9.06%) (8.72%) = 30.19 (0.3)^2 (82.0%) + (0.7)^2*(76.0%) + 2(0.3) (0.7)(-0.87) (9.06 %) (8.72%) = 15.75 (0.3)^2*(82.0%) + (0.7)^2*(76.0%) + [(0.3) (0.7)]^2 (-0.87) (9.06%) (8.72%) = 41.59 (0.3) (82.0%) + (0.7) (76.0%) + 2(0.3) (0.7)(-0.87) (9.06 %) (8.72%) = 48.93

Consider the following portfolio of assets: Loan Weight 1 0.30 2 0.70 Expected returni ம σ2 13% 11% 9.06% 82.0% P12=-0.87 8.72% 76.0% 012-75.0% What is the variance of the portfolio (round to two decimals)? Note: a^2 denotes the square of a. For example, 2^2 = 4, 3^2=9 (0.3)^2(82.0%) + (0.7)^2(76.0%) + (0.3) (0.7)(-0.87) (9.06%) (8.72%) = 30.19 (0.3)^2 (82.0%) + (0.7)^2(76.0%) + 2(0.3) (0.7)(-0.87) (9.06 %) (8.72%) = 15.75 (0.3)^2(82.0%) + (0.7)^2*(76.0%) + [(0.3) (0.7)]^2 (-0.87) (9.06%) (8.72%) = 41.59 (0.3) (82.0%) + (0.7) (76.0%) + 2(0.3) (0.7)(-0.87) (9.06 %) (8.72%) = 48.93

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

Similar questions

Consider the information below, compute the expected return, variance, and standard deviation. Show the solution. Probability Return of Assets 25% .30 25% .050 25% .100 25% .280
Uncorrelated assets A and B have standard deviation of return 0.3 and 0.4 respectively. If a denotes the proportion invested in A, which value of a leads to the Minimum Variance Portfolio? A. 0.55 B. 0.64 C. 0.12 D. 0.80 .
n is the number of periods of an investment, PV is the starting value, FVn is the future value n periods ahead, and ^ means 'to the power of'. What is the correct formula for calculating return? a)(PV/FVn)^n - 1 b)(FVn/PV)^n c)1 - (FVn/PV)^n d)(FVn/PV)^n - 1
The formula for calculating the discount rate to use in net present value (NPV) calculations is as follows: PV = 1 + (1+r)" Where 'n' represents: OA. The number of years you are investing OB. The cost of capital - stated as a percentage OC. The initial investment OD. The cost of capital - stated as a decimal
risk and return
Round to four decimal places.
In this question, you will be asked to calculate the variance/risk of a portfolio consisting of two assets. Consider a portfolio that only consists of asset E and asset B. E has weight of 60%, and B has weight of 40%. The variance of E is about 13%, and the variance of B is about 4%. The covariance between E and B is about 0.2. What is the variance of this portfolio? 0.1492 O 0.1012 0.19 0.094
What is the standard deviation of the portfolio that invests equally in all three assets M, N, and O?
Mean and Variance of Discrete Random Variable and the Characteristics of Normal Random Variable Example 1: Suppose that you are given the option of two investment portfolios, A and B, with potential profits and the associated probabilities displayed below. PORTFOLIO A Profit X -2,000 -4,000 3,000 5,000 PROBABILITY P(x) 0.3 0.1 0.3 0.3 PORTFOLIO B Profit X -3,000 -2,000 4,000 5,000 Probability P(X) 0.2 0.2 0.4 0.2 Calculated Mean and Standard Deviation for Portrollo A: Mean = 1,400 and standard deviation = 3,322.65 Calculated Mean and Standard Deviation for Portrollo B: Mean=1,600 and standard deviation= 3,882.31 A. using the mean and variance of portfolio A, interpret the result B.Based on the expected profits, which portfolio will you choose?
2. Assuming the following: Average Return (Risky Portfolio) 3.86% Standard Dev (Risky Portfolio) 10.56% Average Risk Free Rate 2.18% Return on Risk Free Asset Avg 4.15% Using the formula: E(rc)=rf + y* (E(rp) - rf) Solve for: 1. % of Risky Assets (y): 2. % of Risk Free Assets (1-y): Note: You wish to generate a 7% return for your complete portfolio E(rc)
Which of the following assets dominates Asset X that has 9% expected return andstandard deviation of 11% according to the mean-variance criterion? Asset V: 9.4% expected return, 10% standard deviation Asset R: 8.5% expected return, 7% standard deviation Risk-free asset: 3% expected return, 0% standard deviation Asset S: 11.2% expected return, 14% standard deviation
Q11. n is the number of periods of an investment, PV is the starting value, FVn is the future value n periods ahead, and ^ means 'to the power of'. What is the correct formula for calculating return? Group of answer choices 1. (FVn/PV)^n - 1 2. (FVn/PV)^n 3. (PV/FVn)^n - 1 4. 1 - (FVn/PV)^n

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