Suppose an investor has 50% of her portfolio invested in each stock. What is the standard deviation of the portfolio’s returns?
E(r) =
[Pi x Ri]
=
[Pi x (E(r) - Ri)2]1/2
E(rBanger) = [0.10 x 40%] + [0.75 x 20%] + [0.15 x -20%] = 4% + 15% - 3% = 16%
E(rMash) = [0.10 x 20%] + [0.75 x 15%] + [0.15 x 10%] = 2% + 11.25% + 1.5% = 14.75%
E(rP) = [0.50 x 16%] + [0.50 x 14.75%] = 8% + 7.375% = 15.375%
S.D. = [{0.5 x (15.375% - 16%)2} + {0.5 x (15.375% - 14.75%)2}]1/2
= [0.20%2 + 0.20%2]1/2 = [0.39%2]1/2 = 0.625%
Suppose an investor has 50% of her portfolio invested in each stock. What is the standard...
2) What is the expected return and standard deviation of a portfolio that is invested in stocks A, B, and C? Twenty five percent of the portfolio is invested in stock A, 40 percent is invested in stock C, and the remaining is invested in stock B. (20 pts) Probability of State of Economy State of Economy Boom Normal Recession 5% Returns if State Occurs Stock A Stock B Stock C 17% 6% 22% 8% 10% 15% -3% 19% -25%...
What is the standard deviation of the returns on a portfolio that is invested in Stocks A, B, and C? Twenty percent of the portfolio is invested in Stock A and 35 percent is invested in Stock C. State of Economy Probability of State of Economy Rate of Return if State Occurs Stock A Stock B Stock C Boom .04 .17 .09 .09 Normal .81 .08 .06 .08 Recession .15 − .24 .02 − .13
Stocks A and B have the following historical returns:
1. Calculate the arithmetic average return for each stock.
2. Calculate the standard deviation of returns for each
stock.
3. Assume that 50% of your portfolio is invested in Stock A and
the rest is invested in Stock B. Based on this information, what is
your portfolio’s realized return?
4. If 50% of your portfolio is invested in Stock A and the rest
is invested in Stock B, what is the...
What is the standard deviation of the returns on a portfolio that is invested in Stocks A, B, and C? Twenty percent of the portfolio is invested in Stock A and 35 percent is invested in Stock C. Probability of State of Rate of Return State of Economy Economy if State Occurs Stock Stock A Stock B Boom 04 .17 .09 .09 Normal .81 .08 .06 Recession .15 - 24 .02 - a. 3.28% O b. 4.91% OC 5.65% O...
statistics
4. An investor holds a portfolio consisting of two stocks. She puts 25% of her money in Stock A and 75% into Stock B. Stock A has an expected return of Ri=8% and a standard deviation of 0,=12%. Stock B has an expected return of Rg=15% with a standard deviation of o,=22%. The portfolio return is P=0.25RA +0.75R, (a) Compute the expected return on the portfolio. (b) Compute the standard deviation of the returns on the portfolio assuming that...
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