4t ofAn investment earned the following returns for the years 2013 through 2016:20 %, -5%, 30%, and 10%. What is the variance of returns for thisinvestment?Select one:Oa. 0.2987uestionO b. 0.0892c. 0.0723d. 0.1292e. 0.0292

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Answered: 4 t of An investment earned the…

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

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Clear my Choice An investment produced annual rates of return of 5%, 12%, 7%, 11% and 3% respectively over the past five years. What is the standard deviation of these returns? O a. 1.9% O b. 2.7% O c. 4.6% O d. 3.8%
The expected annual returns are 15% for investment 1 and 12% for investment 2. The standard deviation of the first investment’s return is 10%; the second investment’s return has a standard deviation of 5%. A.) Which investment is less risky based solely on standard deviation? (Investment 1 or Investment 2)B.) Which investment is less risky based on coefficient of variation? (Investment 1 or Investment 2)C.) Which is a better measure given that the expected returns of the two investments are not the same? (Coefficient of Variation or Standard Deviation)
Prob. Return (%) B 0.1 40 G 0.2 30 O 0.3 15 L 0.2 2 S 0.2 -12 where B-Bloom,G-Good, O-Ok, L-Level and S- Slump Probability(p(x)) Return(x) (%) x*p(x) x2*p(x) B 0.1 40 0.1*40=4 0.1*402=160 G 0.2 30 0.2*30=6 0.2*302=180 O 0.3 15 0.3*15=4.5 0.3*152=67.5 L 0.2 2 0.2*2=0.4 0.2*22=0.8 S 0.2 -12 0.2*-12=-2.4 0.2*(-12)2=28.8 Expected return==E(x)=∑x*p(x)=4+6+4.5+0.4-2.4 =12.5% Variance of return=E(x2)-[E(x)]2 E(x2)=∑x2p(x)=160+180+67.5+0.8+28.8 = 437.1 Variance= 437.1-(12.5)2 = 280.85 sd of return= 280.85 = 16.76% The expected return on Granny's gold investment is 12.5% The sd of return on Granny's gold investment is 16.76% 1. In your own words, define the two components of total risk? Give examples of both risks.2. How is beta estimated or calculated?
M102LON/JAN 3. Security A has the following probability distribution of returns: Scenario Probability Return 1 0.1 15% 2 0.8 25% 0.1 35% What is the variance for Security A? a. 0.002 b. 0.020 С. 0.200 d. 0.300 3.
Use the following information to answer the question. Based on above data, determine the expected return? Select one: a. 12.06% b. 19% c. 17.35% d. 16.72%
An asset has an average return of 10.73 percent and a standard deviation of 20.70 percent. What range of returns should you expect to see with a 95 percent probability? Multiple Choice −9.97% to 31.43% −51.37% to 72.83% −30.67% to 52.13% −20.32% to 41.78% −9.97% to 11.49%
Assuming that the rates of return associated with a given asset investment are normally distributed; that the expected return, r, is 18.7%; and that the coefficient of variation, CV, is 1.88, answer the following questions: a. Find the standard deviation of returns, sigma Subscript rσr. b. Calculate the range of expected return outcomes associated with the following probabilities of occurrence: (1) 68%, (2) 95%, (3) 99%.
es Suppose the returns on an asset are normally distributed. The historical average annual return for the asset was 5.7 percent and the standard deviation was 18.3 percent. a. What is the probability that your return on this asset will be less than -4.1 percent in a given year? Use the NORMDIST function in Excel® to answer this question. (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b. What range of returns would you expect to see 95 percent of the time? (Enter your answers for the range from lowest to highest. A negative answer should be indicated by a minus sign. Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) c. What range of returns would you expect to see 99 percent of the time? (Enter your answers for the range from lowest to highest. A negative answer should be indicated by a minus sign. Do not round intermediate calculations and enter…
14. Consider the following possible returns over the next year on an asset Return probability -£40 0.5 £40 0.5 What is the variance of return of the asset.
Su 2 The standard deviation of return on investment A is 19%, while the standard deviation of return on investment B is 14%. If the covariance of returns on A and B is 0.004, the correlation coefficient between the returns on A and B is 00:05:46 臺 Mc Graw Hill Delivery co ler.
Consider the information for assets A, B, and C below: Probability Return on A 0.2 0.4 0.4 State Boom Average Bust 0.3 0.2 0.1 Return on B Return on C 0.05 9.15 0.2 0.1 0.25 0.3 Consider Portfolio (Y) comprising 60% Asset A and 40% Asset C. What is the variance of portfolio Y™?
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4 t of An investment earned the following returns for the years 2013 through 2016:20 %, -5%, 30%, and 10%. What is the variance of returns for this investment? Select one: Oa. 0.2987 uestion O b. 0.0892 c. 0.0723 d. 0.1292 e. 0.0292