Homework Help is Here – Start Your Trial Now!
Business
Finance
. What is the rate of return on the portfolio in each scenario?

. What is the rate of return on the portfolio in each scenario?

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
See similar textbooks
icon
Related questions
Question

Consider the following scenario analysis attached in the images:

Assume a portfolio with weights of 0.60 in stocks and 0.40 in bonds.

a. What is the rate of return on the portfolio in each scenario? (Enter your answer as a percent rounded to 1 decimal place.)

                                              Rate of Return

Recession                                      %

Normal economy                          %

Boom                                               %

 

b.What are the expected rate of return and standard deviation of the portfolio?(Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

Expected Return :              %

Standard Deviation:              %

Rate of Return Scenario Probability Stocks Bonds Recession 0.3 -4% 12% Normal economy 0.4 13 7 Вoom 0.3 22 3
Transcribed Image Text:Rate of Return Scenario Probability Stocks Bonds Recession 0.3 -4% 12% Normal economy 0.4 13 7 Вoom 0.3 22 3
Expert Solution
Step 1

  Portfolio is a collection of security or investments. It is desirable for the investors to invest in those securities to reduce the amount of risk. Portfolio investment will help the investors in avoiding the risk of investing in individual securities.

  • The expected return can be calculated as follows:

Rp=∑t=1nxiri

  • Standard deviation

σ=R1-R¯1N

trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 3 steps

SEE SOLUTIONCheck out a sample Q&A here
Blurred answer
Knowledge Booster
Risk and Return
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
Essentials Of Investments
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
FUNDAMENTALS OF CORPORATE FINANCE
FUNDAMENTALS OF CORPORATE FINANCE
Finance
ISBN:
9781260013962
Author:
BREALEY
Publisher:
RENT MCG
Financial Management: Theory & Practice
Financial Management: Theory & Practice
Finance
ISBN:
9781337909730
Author:
Brigham
Publisher:
Cengage
Foundations Of Finance
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education
SEE MORE TEXTBOOKS