Question

Last year, a fund manager invested in three companies: Allen Dynamics, Bosh Heating, and Creole Plumbing. Below, the results for his investment are shown: # of shares purchased Price per share in 2017 Price per share in 2018 Allen Dynamics 100.00 $10.00 $11.00 Bosh Heating 50.00 $16.00 $18.00 Creole Plumbing 200.00 $5.00 $5.75 What is the value of his portfolio at the end of 2018? Submit Answer format: Currency: Round to: 2 decimal places.

#8 An investor is looking at a stock that has four possible values in the next year. The probabilities and returns are shown below. OUTCOME: Probability Return Strong Economy 0.24 25.00% Good Economy 0.26 10.00% Poor Economy 0.32 0.00% Recession 0.18 -11.00% What is the expected return on this stock based on the probabilities? Submit Answer format: Percentage Round to: 2 decimal places (Example: 9.24%, % sign required. Will accept decimal format rounded to 4 decimal places (ex: 0.0924))

Answer 1

1). Total Investment in 2018 = Investment in Allen Dynamics + Investment in Bosh Heating + Investment in Creole Plumbing

= [100 * $11] + [50 * $18] + [200 * $5.75]

= $1,100 + $900 + $1,150 = $3,150

2). Portfolio's Expected Return = [Probability(i) * Return(i)]

i=1

= [0.24 * 25%] + [0.26 * 10%] + [0.32 * 0%] + [0.18 * (-11%)]

= 6% + 2.6% + 0% - 1.98% = 6.62%