(Expected return and risk) Universal Corporation is planning to invest in a security that has several possiblerates of return. Given the probability distribution of returns in the popup window,, what is the expected rateof return on the investment? Also compute the standard deviation of the returns. What do the resultingnumbers represent?a. The expected rate of return on the investment is ☐ %. (Round to two decimal places.)b. The standard deviation of the returns is%. (Round to two decimal places.)c. What do the resulting numbers represent? (Select the best choice below.)○ A. Universal could expect a return of 8.75 percent with a 67 percent possibility that this return would varyup or down by 8.04 percent.B. Universal could expect a return of 8.04 percent with a 67 percent possibility that this return would varyup or down by 8.75 percent.C. Universal could expect a return of 8.75 percent with a 25 percent possibility that this return would varyup or down by 8.04 percent.D. Universal could expect a return of 8.04 percent with a 25 percent possibility that this return would varyup or down by 8.75 percent.Data TablePROBABILITYRETURN0.05-15%Click to sel0.150%0.255%0.5515%

a. The expected rate of return on the investment is 8.75%.b. The standard deviation of the returns…

Answered: (Expected return and risk) Universal…

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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There are two risky assets and a riskfree asset. The riskfree rate is 0.03. The first risky asset has expected rate of return 0.18 and standard deviation 0.3; the second risky asset 0.09 and 0.2. Their correlation is 0.1. A portfolio on the best feasible CAL has an expected return of 0.12. Then this portfolio's portfolio weight on the first risky asset is 0%. (Enter a percentage number and keep 3 decimal places).
Asset W has an expected return of 13.4 percent and a beta of 1.6. If the risk-free rate is 5.0 percent, complete the following table for portfolios of Asset W and a risk-free asset. (Do not round intermediate calculations and enter your expected return answers as a percent rounded to 2 decimal places, e.g., 32.16. Round your beta answers to 3 decimal places, e.g., 32.161.) Asset W has an expected return of 13.4 percent and a beta of 1.6. If the risk-free rate is 5.0 percent, complete the following table for portfolios of Asset W and a risk-free asset. (Do not round intermediate calculations and enter your expected return answers as a percent rounded to 2 decimal places, e.g., 32.16. Round your beta answers to 3 decimal places, e.g., 32.161.)
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 (Attached image). 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?
Calculate the required rate of return for an asset that has a beta of 1.01, given a risk-free rate of %3.4 and a market return of %9.1 . b. If investors have become more risk-averse due to recent geopolitical events, and the market return rises to %11.6, what is the required rate of return for the same asset? a. The required rate of return for the asset is enter your response here%. (Round to two decimal places.) Part 2 b. If investors have become more risk-averse due to recent geopolitical events, and the market return rises to 11.6%, the required rate of return for the same asset is enter your response here%. (Round to two decimal places.)
Please do in text form so i can copy that pls
Assume that you are considering investing in two risky assets, namely PKX and XIY, with the following probability distribution. Assume that short selling is allowed. Stock РКХ XIY State of the world Probability Return (%) Return (%) 1 0.25 18 2 0.30 5 -3 3 0.20 12 15 4 0.10 4 12 0.15 6 1 1. Calculate the expected return and risk for each of these assets. Interpret. 2. Consider a portfolio that contains PKX and XIY. Note that XIY comprises 30% of the portfolio. What is the expected return and risk of this portfolio? 3. How will your answer in (2) change if XIY comprises 20% of the portfolio only? Comment on your findings.
The expected return for the investment is ??? The standard deviation is ??? While the expected return for the risk-free assets, Treasury Bills, is ??? The standard deviation is ???
1. Suppose you have n risky assets you can combine in a portfolio. Each risky asset has an expected return of 8% and a standard deviation of 30%. The risky assets are uncorrelated with each other. (a) Consider an equally weighted portfolio of 2 of these securities. What is its expected return? What will its standard deviation be? (b) Consider an equally weighted portfolio of 30 of these securities. What is its expected return? What will its standard deviation be? (c) Suppose we let the number of these securities increase without bound. That is, n→ ∞o. What happens to the standard deviation of an equally weighted portfolio of these securities as the number of assets in the portfolio becomes extremely large? What will the riskless rate be in this case, and why? -int IDE
1. Consider a Treasury bill with a rate of return of 1% and the following risky securities: Security A: E(r) =0.1; variance = 0.03; Security B: E(r) = 0.015; variance = 0.0225; Security C: E(r) = 0.07; variance = 0.04; Security D: E(r) = 0.25; variance = 0.25.The investor must develop a complete portfolio by combining the risk-free asset with one of the securities mentioned above. The security the investor should choose as part of her complete portfolio to achieve the best CAL would be _________." A B C D 2. Security with normally distributed returns has an annual expected return of 10% and a standard deviation of 6%. The probability of getting a return between -1.76% and 21.76% in any one year is NOTE: All answers should be express in strictly numerical terms. For example, if the answer is 5%, write 0.05
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An investment has probabilities 0.15, 0.34, 0.44, 0.67, 0.2 and 0.15 of giving returns equal to 50%, 39%, -4%, 20%, -25%, and 42%. What are the expected returns and the standard deviations of returns?

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