Information about Three investments as below Years Probability Investment A Investment B Investment C 1 0.1 300 850 500 2 0.2 350 560 600 3 0.35 280 450 700 4 0.2 460 680 800 5 0.15 500 700 900 If the investor wants to invest in any two of the above investments equally, which combination of two investments you select based on the portfolio risk?

Information about Three investments as below Years Probability Investment A Investment B Investment C 1 0.1 300 850 500 2 0.2 350 560 600 3 0.35 280 450 700 4 0.2 460 680 800 5 0.15 500 700 900 If the investor wants to invest in any two of the above investments equally, which combination of two investments you select based on the portfolio risk?

Personal Finance

13th Edition

ISBN:9781337669214

Author:GARMAN

Publisher:GARMAN

Chapter16: Real Estate And High-risk Investments

Section: Chapter Questions

Problem 8LTAI

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An investor wants to determine the safest way to structure a portfolio from several investments, whose annual returns under different scenarios are as follows: Returns Scenario A B. D Probability 1. 0.11 -0.09 0.10 0.07 0.10 -0.11 0.12 0.14 0.06 0.10 3 0.09 0.15 0.11 0.08 0.10 4 0.25 0.18 0.33 0.07 0.30 0.18 0.16 0.1 0.06 0.40 9. Suppose the investor ignores the scenarios have different probabilities. If he has determined his risk aversion value is 0.75, what percentage of his portfolio should be invested in A? percent 2.
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The optimal proportion of the risky asset in the complete portfolio is given by the equation below y*= E(Rp− Rf) A0² For each of the variables on the right side of the equation, discuss the impact of the variable's effect on y* and why the nature of the relationship makes sense intuitively. Assume the investor is risk averse
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