8. Consider the following Scenario Analysis: Scenario Probability Stock Return Bond Return Recession 0.2 - 4% +12% Normal Economy 0.6 +12% +8% Strong Economy 0.2 +20% +5% Assume you have a portfolio that is weighted 40% in stocks and 60% in bonds. a) What are the expected rate of return and standard deviation of the portfolio? (12 points) b) Please explain BRIEFLY in words whether a rational investor would prefer to invest in the portfolio, in stocks only, or in bonds only. (5 points)
Correlation=covariance/(std of stock*std of bond)
a) Expected return of portfolio=9.08%
std of portoflio=1.82%
b)Rational investor will prefer to invest in the portfolio rather than Stocks or bonds in total because for the portfolio the standard deviation is lesser than individual stock and bond and expected return is also higher than Bonds
8. Consider the following Scenario Analysis: Scenario Probability Stock Return Bond Return Recession 0.2 - 4%...
Consider the following scenario analysis: Rate of ReturnScenarioProbabilityStocksBondsRecession0.20-5%14% Normal economy 0.60158Boom0.20 254Assume a portfolio with weights of .60 in stocks and .40 in bonds. a. What is the rate of return on the portfolio in each scenario? (Do not round percent rounded to 1 decimal place.) Rate of Return Recession Normal economy Boomb. What are the expected rate of return and standard deviation of the portfolio? (Do not round intermediate calculations. Enter your answer as...
Consider the following scenario analysis: Rate of Return Scenario Probability Stocks Bonds Recession 0.20 –6 % 18 % Normal economy 0.50 19 11 Boom 0.30 26 8 a. Is it reasonable to assume that Treasury bonds will provide higher returns in recessions than in booms? b. Calculate the expected rate of return and standard deviation for each investment. Expected Rate of Return Standard Deviation Stocks ? ? Bonds ? ?
Consider the following scenario analysis: Scenario Recession Normal economy Boom Rate of Return Probability Stocks Bonds 0.20 -5% 14% 0.60 158 0.20 1 25 4 a. Is it reasonable to assume that Treasury bonds will provide higher returns in recessions than in booms? • Yes No b. Calculate the expected rate of return and standard deviation for each investment. (Do not round intermediate calculations. Enter your answers as a percent rounded to 1 decimal place.) Expected Rate of Return Standard...
HW8: Chapter 11 HW8: Chapter 11 Saved Consider the following scenario analysis: cate ility Stocks Scenario Recession Normal economy Boom points Assume a portfolio with weights of 0.60 in stocks and 0.40 in bonds. eBook a. What is the rate of return on the portfolio in each scenario? (Enter your answer as Rate of Return Recession Normal economy Boom References
10. Consider the following scenario analysis Scenario Recession Normal economy Boom Probability 0.20 0.60 0.20 Rate of Return StocksBonds -5.0% 14.0% 15.0% 8.0% 25.0% 4.0% a. Calculate the expected rate of return and standard deviation for each investment b. Calculate the coefficient of variation on stocks and bonds.
Consider the following scenario analysis: Rate of Return ProbabilityStocks Bonds -6% Scenario Recession 17% 0.20 Normal economy 0.50 20 Boom 0.30 29 6 a. Is it reasonable to assume that Treasury bonds will provide higher returns in recessions than in booms? O No O Yes b. Calculate the expected rate of return and standard deviation for each investment. (Do not round intermediate calculations. Enter your answers as a percent rounded to 1 decimal place.) Expected Rate of Return Standard Deviation...
< 087c3bf05caf46f2ae409104186c6b97.xlsx 6 Q No.3 Economy Recession Normal Good Boom Probability 20% 35% 35% 10% Stocks -5% 10% 14% 18% Bonds 15% 12% 11% 9% Part A 1. Calculate expected return and standard deviation of each stock and bonds. 2. Which investment is less risky based on standard deviation? Part B (part B will be solved separately from part A. You can only take data from question number 3 and make portfolio. In case of any problem recheck zoom recording...
Consider the following information: State of Economy Probability of State of Economy Rate of Return If State Occurs Stock A Stock B Stock C Boom 0.25 14% 15% 33% Bust 0.75 12% 3% -6% What is the expected return and standard deviation of returns on an equally weighted portfolio of these three stocks? 2. Consider the following information: State of Economy Probability of State of Economy Rate of Return If State Occurs Stock K Stock M Boom 0.10 25% 18%...
Consider the following table: Stock Fund Bond Fund Rate of Return Scenario Severe recession Probability Rate of Return 0.10 -43% -12% Mild recession 0.20 -17% 17% 12% Normal growth 0.30 6% 31% Boom 0.40 4% a. Calculate the values of mean return and variance for the stock fund. (Do not round interr Round "Mean return" value to 1 decimal place and "Variance" to 4 decimal places.) 06 Mean return %-Squared Variance b. Calculate the value of the covariance between the...
Consider the following table: Stock Fund Bond Fund Scenario Probability Rate of Return Rate of Return Severe recession .10 –37% –9% Mild recession .20 –11% 15% Normal growth .35 14% 8% Boom .35 30% –5% Calculate the value of the covariance between the stock and bond funds.