Statistics and Probability
(37 marks) Your client is planning to invest some money with your investment company. The client narrows their options down to 2 investment strategies X and Y , and from past experience the annual percentage returns are as follows: X ∼ N(3, 1 2 ) and Y ∼ N(5, 3 2 ).
(a) For each investment strategy, calculate the probability of a negative return. [4 marks]
(b) For each investment strategy, calculate the probability of return greater than 5.5%.
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a. Stock Moon and Noon have the following probability distributions of returns: Probability Returns Stock Moon...
a. Stock Moon and Noon have the following probability distributions of returns: Probability Returns Stock Moon Stock Noon 20% 10% 12% 15% 2% 0.3 0.4 0.3 -2% From the above information, calculate for each stock: i) The expected rate of return. (3 Marks) ii) The standard deviation. (3 Marks) iii) The coefficient of variation. (2 Marks) iv) Based on your calculation in part (iii), decide on the stock that you should invest on. Justify your answer. (4 Marks) b. Suppose...
3% 1. Here are the probability distributions for three investment project returns: Up (prob = Down...
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Problem 1.2. The current price of a stock is $72. Three-month call options with a strike...
Problem 1.2. The current price of a stock is $72. Three-month call options with a strike price of $75 currently sell for $10. An investor with $9,000 to invest is considering the following three investment strategies: (a) Investing all his money in the stock (6) Doubling the amount to invest by taking a loan of $9,000 at an interest rate of 2% for three months, investing the resulting $18,000 in the stock and then repaying $9,180 on the loan (c)...
The current price of a stock is $72. Three-month call options with a strike price of...
The current price of a stock is $72. Three-month call options with a strike price of $75 currently sell for $10. An investor with $9,000 to invest is considering the following three investment strategies: (a) Investing all his money in the stock (b) Doubling the amount to invest by taking a loan of $9,000 at an interest rate of 2% for three months, investing the resulting $18,000 in the stock and then repaying $9,180 on the loan (c) Investing all...
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Here are the probability distributions for three investment project returns: Up (prob = Down (prob =...
Here are the probability distributions for three investment project returns: Up (prob = Down (prob = 0.4) 0.6) -2% -2.5% 3% 14% -8% 5% Calculate the expected return and standard deviation of each project and explain which one a rational investor would choose. b)Given your answer in part a., if you can only split your investment by half, which two projects would you invest in, and what becomes the expected return and standard deviation of your portfolio?
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Question4 Kamet is an investment fund that invests on the Ghana Stock Exchange. In recent times t...
Question4 Kamet is an investment fund that invests on the Ghana Stock Exchange. In recent times the economy has gone through four different cycles which analyst believe may be repeated in the years ahead. Kamet is reviewing its investment strategy and is looking for the best way to malke good returns for its clients. The returns on thrce assets selected by Kamet are provided below Business Cyele Probability Unilever Normal Boom Near Recession Recession 0.30 0.40 0.10 ???,20.1.. 40% 20%...
Problem 2-39 innis Investments manages funds for a number of companies and weslthy cients. The investment strategy...
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Possible Returns Probability Investment Investment Y .05 -10% 0% 5% 5% 20% 16% 25 30% 24% .05 40% 32% Calculate the expected return and standard deviation for each investment. Find the standard deviation manually Upload your work to receive credit. Probability Returns .40 7% 4% 18% 10%
a. Stock Moon and Noon have the following probability distributions of returns: Probability Returns Stock Moon Stock Noon 20% 10% 12% 15% 2% 0.3 0.4 0.3 -2% From the above information, calculate for each stock: i) The expected rate of return. (3 Marks) ii) The standard deviation. (3 Marks) iii) The coefficient of variation. (2 Marks) iv) Based on your calculation in part (iii), decide on the stock that you should invest on. Justify your answer. (4 Marks) b. Suppose...
3% 1. Here are the probability distributions for three investment project returns: Up (prob = Down (prob = 0.4) 0.6) 5% -2% -2. 5% 14% -8% a. Without calculation, which two assets (X&Y, Y&Z, or X&Z) can reach the goal of diversification, which not? Explain. b. Calculate the expected return and standard deviation of each project and explain which one a rational investor would choose. c. Given your answer in part a., if you can only split your investment by...
Problem 1.2. The current price of a stock is $72. Three-month call options with a strike price of $75 currently sell for $10. An investor with $9,000 to invest is considering the following three investment strategies: (a) Investing all his money in the stock (6) Doubling the amount to invest by taking a loan of $9,000 at an interest rate of 2% for three months, investing the resulting $18,000 in the stock and then repaying $9,180 on the loan (c)...
Here are the probability distributions for three investment project returns: Up (prob = Down (prob = 0.4) 0.6) -2% -2.5% 3% 14% -8% 5% Calculate the expected return and standard deviation of each project and explain which one a rational investor would choose. b)Given your answer in part a., if you can only split your investment by half, which two projects would you invest in, and what becomes the expected return and standard deviation of your portfolio?
Question4 Kamet is an investment fund that invests on the Ghana Stock Exchange. In recent times the economy has gone through four different cycles which analyst believe may be repeated in the years ahead. Kamet is reviewing its investment strategy and is looking for the best way to malke good returns for its clients. The returns on thrce assets selected by Kamet are provided below Business Cyele Probability Unilever Normal Boom Near Recession Recession 0.30 0.40 0.10 ???,20.1.. 40% 20%...
Problem 2-39 innis Investments manages funds for a number of companies and weslthy cients. The investment strategy is tailored to each client's needs. For a new dient, Innis has been authorized to invest up to $1.2 million in two investment funds: a stock fund and a money market fund costs $100 and provides an annual rate of return of 4%. money market fund. Each unit of the stock fund costs SS and prov des an annual rate of return of...
Possible Returns Probability Investment Investment Y .05 -10% 0% 5% 5% 20% 16% 25 30% 24% .05 40% 32% Calculate the expected return and standard deviation for each investment. Find the standard deviation manually Upload your work to receive credit. Probability Returns .40 7% 4% 18% 10%
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