2. 15. (6) The probability distribution of returns on two (02) assets are given as follows: Probability 0.3 0.4 0.3 Asset X Return (%) -5 3 15 Probability 0.2 0.6 0.2 Asset Y Return (%) -7 0 8 a. Calculate the mean and variance of the returns for securities X and Y. b. If you had to choose either X or Y, which would you prefer? c. If the correlation coefficient of the returns of two (02) securities is .2, what is the covariance of returns for X and Y? d. Given the covariance value you computed in Part ©, find the mean and variance for a portfolio comprised of 30% of X and 70% of Y.
2. 15. (6) The probability distribution of returns on two (02) assets are given as follows: Probability 0.3 0.4 0.3 Asset X Return (%) -5 3 15 Probability 0.2 0.6 0.2 Asset Y Return (%) -7 0 8 a. Calculate the mean and variance of the returns for securities X and Y. b. If you had to choose either X or Y, which would you prefer? c. If the correlation coefficient of the returns of two (02) securities is .2, what is the covariance of returns for X and Y? d. Given the covariance value you computed in Part ©, find the mean and variance for a portfolio comprised of 30% of X and 70% of Y.
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
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Transcribed Image Text:Q. 15. (6) The probability distribution of returns on two (02) assets are given as follows:
Probability
0.3
0.4
0.3
Asset X
Return (%)
-5
3
15
Probability
0.2
0.6
0.2
Asset Y
Return (%)
-7
0
8
a. Calculate the mean and variance of the returns for securities X and Y.
b. If you had to choose either X or Y, which would you prefer?
c. If the correlation coefficient of the returns of two (02) securities is .2, what is the
covariance of returns for X and Y?
d. Given the covariance value you computed in Part ©, find the mean and variance for a
portfolio comprised of 30% of X and 70% of Y.
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