Celestial Crane Cosmetics | |||
State of Economy | Probabilty | Return |
Probability* Return |
Strong | 0.5 | 0.3 | 0.15 |
Normal | 0.25 | 0.18 | 0.045 |
Weak | 0.25 | -0.24 | -0.06 |
Expected Return = Sum of Probabilty*Return |
0.135 = 13.5% |
Lumbering Ox Truckmakers | |||
State of Economy | Probabilty | Return |
Probability* Return |
Strong | 0.5 | 0.42 | 0.21 |
Normal | 0.25 | 0.24 | 0.06 |
Weak | 0.25 | -0.3 | -0.075 |
Expected Return = Sum of Probabilty*Return |
0.195 = 19.5% |
CCC | LOT | Portfolio
Return [{R(CCC)*W(CCC)}+{R(LOT)*W(LOT)}] |
|||
Return | Weight | Return | Weight | ||
Strong | 0.3 | 0.75 | 0.42 | 0.25 | 0.33 |
Normal | 0.18 | 0.75 | 0.24 | 0.25 | 0.195 |
Weak | -0.24 | 0.75 | -0.3 | 0.25 | -0.255 |
Portfolio | |||
State of Economy | Probabilty | Return |
Probability* Return |
Strong | 0.5 | 0.33 | 0.165 |
Normal | 0.25 | 0.195 | 0.04875 |
Weak | 0.25 | -0.255 | -0.06375 |
Expected Return = Sum of Probabilty*Return |
0.15 = 15% |
X-Axis represents Rate of Return. So, it is clear that, Range of Return of B is MORE than that of A. Therefore, A has a Smaller standard deviation.
2. Statistical measures of standalone risk Remember, the expected value of a probability distribution is a...
2. Statistical measures of stand-alone risk Remember, the expected value of a probability distribution is a statistical measure of the average (mean) value expected to occur during all possible circumstances. To compute an asset's expected return under a range of possible circumstances (or states of nature), multiply the anticipated return expected to result during each state of nature by its probability of occurrence. Consider the following case: David owns a two-stock portfolio that invests in Celestial Crane Cosmetics Company (CCC)...
1. Statistical measures of standalone risk Aa Aa Remember, the expected value of a probability distribution is a statistical measure of the average (mean) value expected to occur during all possible circumstances. To compute an asset's expected return under a range of possible circumstances (or states of nature), multiply the anticipated return expected to result during each state of nature by its probability of occurrence. Consider the following case: Tyler owns a two-stock portfolio that invests in Celestial Crane Cosmetics...
Remember, the expected value of a probability distribution is a statistical measure of the average (mean) value expected to occur during all possible circumstances. To compute an asset's expected return under a range of possible circumstances (or states of nature), multiply the anticipated return expected to result during each state of nature by its probability of occurrence Consider the following case: Antonio owns a two-stock portfolio that invests in Celestial Crane Cosmetics Company (COC) and Lumbering Ox Truckmakers (LOT). Three-quarters...
Consider the following case: Aaron owns a two-stock portfolio that invests in Celestial Crane Cosmetics Company (CCC) and Lumbering Ox Truckmakers (LOT) Three-quarters of Aaron's portfolio value consists of CCC's shares, and the balance consists of LOT's shares. Each stock's expected return for the next year will depend on forecasted market conditions. The expected returns from the stocks in different market conditions are detailed in the following table: Market Condition Probability of Occurrence Celestial Crane Cosmetics Lumbering Ox Truckmakers Strong...
Consider the following case: David owns a two-stock portfolio that invests in Celestial Crane Cosmetics Company (CCC) and Lumbering Ox Truckmakers (LOT). Three-quarters of David's portfolio value consists of CCC's shares, and the balance consists of LOT's shares. Each stock's expected return for the next year will depend on forecasted market conditions. The expected returns from the stocks in different market conditions are detailed in the following table: Market Condition Probability of Occurrence Celestial Crane Cosmetics Lumbering Ox Truckmakers Strong...
Consider the following case: David owns a two-stock portfolio that invests in Celestial Crane Cosmetics Company (CCC) and Lumbering Ox Truckmakers (LOT). Three-quarters of David's portfolio value consists of CCC's shares, and the balance consists of LOT's shares. Each stock's expected return for the next year will depend on forecasted market conditions. The expected returns from the stocks in different market conditions are detailed in the following table: Market Condition Probability of Occurrence Celestial Crane Cosmetics Lumbering Ox Truckmakers Strong...
1. Statistical measures of standalone risk Aa Aa Remember, the expected value of a probability distribution is a statistical measure of the average (mean) value expected to occur during all possible circumstances. To compute an asset's expected return under a range of possible circumstances (or states of nature), multiply the anticipated return expected to result during each state of nature by its probability of occurrence. Consider the following case: Juan owns a two-stock portfolio that invests in Falcon Freight Company...
Aa Aa 1. Statistical measures of standalone risk Remember, the expected value of a probability distribution is a statistical measure of the average (mean) value expected to occur during all possible circumstances. To compute an asset's expected return under a range of possible circumstances (or states of nature), multiply the anticipated return expected to result during each state of nature by its probability of occurrence Consider the following case: Ethan owns a two-stock portfolio that invests in Blue Llama Mining...
2. Statistical measures of stand-alone risk Remember, the expected value of a probability distribution is a statistical measure of the average (mean) value expected to occur during all possible circumstances. To compute an asset’s expected return under a range of possible circumstances (or states of nature), multiply the anticipated return expected to result during each state of nature by its probability of occurrence. Consider the following case: James owns a two-stock portfolio that invests in Blue Llama Mining Company (BLM)...
Remember, the expected value of a probability distribution is a statistical measure of the average (mean) value expected to occur during all possible circumstances. To compute an asset's expected return under a range of possible circumstances (or states of nature), multiply the anticipated return expected to result during each state of nature by its probability of occurrence. Consider the following case: Joshua owns a two-stock portfolio that invests in Falcon Freight Company (FF) and Pheasant Pharmaceuticals (PP). Three-quarters of Joshua's...