7… |
Mean return for YY=Sum (prob.*exp.Return) |
(0.4*-1%)+(0.2*0)+(0.2*1%)+(0.1*2%)+(0.1*8%)= |
0.8% |
Std. Devn. Of returns of YY=Sq. Rt. Of( Sum Prob. *(exp.ret.-Mean ret.)^2)) |
Sum Prob. *Variances =(0.4*(-1%-0.8%)^2)+(0.2*(0-0.8%)^2)+(0.2*(1%-0.8%)^2)+(0.1*(2%-0.8%)^2)+(0.1*(8%-0.8%)^2)= |
0.000676 |
Std. devn.=Sq. Rt. Of variance=(0.000676)^(1/2)= |
2.60% |
ANSWER: b. 2.60% |
8.. |
Mean return for XX= |
(0.4*-17%)+(0.2*-3%)+(0.2*1%)+(0.1*3%)+(0.1*9%)= |
-6.00% |
Std. Devn. Of returns of YY=Sq. Rt. Of( Sum Prob. *Variances) |
Sum Prob. *Variances =(0.4*(-17%-(-6%))^2)+(0.2*(-3%-(-6%))^2)+(0.2*(1%-(-6%))^2)+(0.1*(3%-(-6%))^2)+(0.1*(9%-(-6%))^2)= |
0.00906 |
Std. devn.=(0.00906)^(1/2)= |
9.52% |
Mean return for ZZ= |
(0.4*-6%)+(0.2*-1%)+(0.2*4%)+(0.1*8%)+(0.1*11%)= |
0.10% |
Std. Devn. Of returns of YY=Sq. Rt. Of( Sum Prob. *Variances) |
Sum Prob. *Variances =(0.4*(-6%-0.1%)^2)+(0.2*(-1%-0.1%)^2)+(0.2*(4%-0.1%)^2)+(0.1*(8%-0.1%)^2)+(0.1*(11%-0.1%)^2)= |
0.003629 |
Std. devn.=(0.003629)^(1/2)= |
6.02% |
Coefficient of Variation(oeff.COV)=Std. devn./Mean returns |
Coeff.OV(XX)=9.52%/-6% |
-1.59 |
Coeff.OV(YY)=2.60%/0.8%= |
3.25 |
Coeff.OV(ZZ)=6.02%/0.1%= |
60.2 |
ANSWER: -1.59, 60.2, & 3.25 |
9. Best equity to Invest in |
c. YY |
As the mean return is the highest & |
also the std. devn. Of returns from the mean is the least |
as shown in the foll.table |
Summary | XX | YY | ZZ |
Mean | -6.00% | 0.8% | 0.10% |
Std. Devn. | 9.52% | 2.60% | 6.02% |
Coeff. OV | -1.59 | 3.25 | 60.2 |
10.Expected return of the given portfolio= |
Sum(Wt.*Mean Returns) |
ie.(50%*-6%)+(25%*0.1%)+(25%*0.8%)= |
-2.775% |
ANSWER: a. -2.775% |
The tabel is posted twice. Hopefully it is clear enough in one of those photos.
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