JJ is a risk-averse investor, she cannot decide whether to invest in stock A or Stock B or in a portfolio that is a combination of both stocks. He has approached the bank and the company has provided her with the following information Probability (%) Expected return (%) Stock A Expected return (%) Stock B 30 13 15 20 14 13 20 15 12 30 16 11 Using these stocks, he has identified two investment portfolio alternatives: Alternative Portfolio 1 100% of A 2 30% of A and 60% of B Calculation the portfolio return and standard deviation for each alternative
JJ is a risk-averse investor, she cannot decide whether to invest in stock A or Stock B or in a portfolio that is a combination of both stocks. He has approached the bank and the company has provided her with the following information Probability (%) Expected return (%) Stock A Expected return (%) Stock B 30 13 15 20 14 13 20 15 12 30 16 11 Using these stocks, he has identified two investment portfolio alternatives: Alternative Portfolio 1 100% of A 2 30% of A and 60% of B Calculation the portfolio return and standard deviation for each alternative
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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JJ is a risk-averse investor, she cannot decide whether to invest in stock A or Stock B or in a portfolio that is a combination of both stocks. He has approached the bank and the company has provided her with the following information
| Probability (%) |
Expected return (%) Stock A |
Expected return (%) Stock B |
| 30 | 13 | 15 |
| 20 | 14 | 13 |
| 20 | 15 | 12 |
| 30 | 16 | 11 |
Using these stocks, he has identified two investment portfolio alternatives:
| Alternative | Portfolio |
| 1 | 100% of A |
| 2 | 30% of A and 60% of B |
Calculation the portfolio return and standard deviation for each alternative
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