Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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Question
Marcus has an investment portfolio that paid the
Required:
-
a) Calculate the arithmetic average return and the geometric average return of this
portfolio.
-
b) Discuss the difference between arithmetic average return and the geometric
average return. When should Marcus use a specific average return?
-
c) If the following information is available for Marcus’s portfolio in the
forecast for next year, calculate the expected return and identify the risk of return by computing the variance and the standard deviation.
State of economy
Boom Normal Recession
Question 5
Probability of the economic state
0.55 0.30 0.15
Rate of Return
25% 17% -8%
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- Please answer fast i give you upvote.arrow_forwardSuppose the average return on Asset A is 6.6 percent and the standard deviation is 8.6 percent and the average return and standard deviation on Asset B are 3.8 percent and 3.2 percent, respectively. Further assume that the returns are normally distributed. Use the NORMDIST function in Excel® to answer the following questions. a. What is the probability that in any given year, the return on Asset A will be greater than 11 percent? Less than 0 percent? (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) b. What is the probability that in any given year, the return on Asset B will be greater than 11 percent? Less than 0 percent? (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) c-1. In a particular year, the return on Asset A was −4.25 percent. How likely is it that such a low return will recur at some point in the future? (Do…arrow_forwardYou are examining a portfolio consisting of three stocks. Using the data in the table a. Compute the annual returns for a portfolio with 25% invested in North Air, 25% invested in West Air, and 50% invested in Tex Oil. b. What is the lowest annual return for your portfolio in part (a)? How does it compare with the lowest annual return of the individual stocks or portfolios in the table above. a. Compute the annual returns for a portfolio with 25% invested in North Air, 25% invested in West Air, and 50% invested in Tex Oil. The annual return for 2014 will be: (Round to two decimal places.) Year 2014 Year 2016 North Air 21% Year 2018 North Air The annual return for 2015 will be: (Round to two decimal places.) Year 2019 29% 6% Year 2015 The annual return for 2016 will be: (Round to two decimal places.) North Air North Air West Air West Air -6% 8% North Air -1% West Air North Air 21% 8% 6% The annual return for 2017 will be: (Round to two decimal places.) West Air Year 2017 The annual…arrow_forward
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