Question

Question 13 1 pts Let's say Tim invested 40% of his money to buy ABC Corp.'s shares and 60% of his money to buy DEF Corp.'s shares in 2013. From 2014 to 2017, ABC Corp. generated the total return percentage of 11%, 13%, 8%, 12%. DEF Corp. generated the total return percentage of -2%, 12%, -3%, and 19% during the same time period. What is the standard deviation of the portfolio's returns from 2014 to 2017? 7.14% 0.51% 6.24% 0.39% Question 14 1 pts Paulie invested $20,000 in ABC Corp. and $40,000 in DEF Corp. the return percentages of ABC Corp. and DEF Corp. will vary as shown in the information below: State of Economy Probability of State DEF Return ABC Return Вoom 35% 15% 7% Good 25% 12% 7% 30% 8% 6% Poor -10% 6% Bust 10% What is the expected return of Paulie's investment? 6.25% 7.62% 6.42% 9.65%

Answer 1

B 1 Weight ABC 2 Weight DEF 0.4 0.6 Year 2014 2015 2016 2017 Returns ABC Returns DEF 11 | -2 13 12 8 -3 12 19 11 6.5 10 Mean Return 11 12 Standard Deviation 13 14 Covariance 1.8708 9.3408 13 16 Portfolio Standard Deviation 17 6.2 OPTION (C)

B 0.4 0.6 A 1 Weight ABC 2 Weight DEF 3 4 Year 5 2014 6 2015 7 2016 8 2017 Returns ABC Returns DEF 11 13 8 -2 12 -3 19 12 9 10 Mean Return =SUM(B5:38)/4 =SUM(C5:C8)/4 11 12 Standard Deviation =(((B5-B10)^2+(B6-B10)^2 =(((C5-C10)^2+(C6-C10)^2+(C7-C10)^2+(C8-C10)^2)/4)^0.5 13 14 Covariance 1 =((B5-B10)*(C5-C10)+(B6-B10)*(C6-C10)+(B7-B10)*(C7-C10)+(B8-B10)*(C8-C10)/4 15 16 Portfolio Standard Deviation =((B12*B1^2+(C12*B2)^2+(2*B1*B2*B14))^0.5 17 OPTION (C)

B 20 21 answer 14 22 23 Weight ABC 24 Weight DEF 25 Total 26 20000 40000 60000 0.333333333 0.666666667 27 28 Return ABC Return DEF 8 State Probability 29 Boom 0.35 30 Good 0.25 31 Poor 0.3 32 Bust 0.1 33 34 35 Mean Return -10 9.65 6.6 36 Portfolio Return 37 38 7.62 Option (b)

20000 40000 60000 =B23/B25 =B24/B25 Α 20 21 answer 14 22 23 Weight ABC 24 Weight DEF 25 Total 26 27 28 State 29 Boom 30 Good 31 Poor 32 Bust 33 34 35 Probability Return ABC Return DEF 15 12 0.35 0.25 0.3 0.1 8 -10 Mean Return = (C29*B29)+(C30*B30)+(C31*B31)+(C32*B32) =(D29*B29)+(D30*B30)+(D31*B31)+(D32*B32) 36 37 Portfolio Return =(C35*C23)+(D35*C24) 38 Option (b)