a) Using the historical data as indicator, calculate Arifah portfolio return (hint: assume Arifah is using the weigh based on acquisition information)
a) Using the historical data as indicator, calculate Arifah portfolio return (hint: assume Arifah is using the weigh based on acquisition information)
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
Related questions
Question
- a) Using the historical data as indicator, calculate Arifah portfolio return (hint: assume Arifah is using the weigh based on acquisition information)
- b) What would be her existing portfolio risk?
- c) If Arifah is to decide solely on the expected return data, which stock should she let go?
- d) Based on the decision made in question c), what will be the expected portfolio return for Arifah? (hint: assume Arifah is using the weigh based on acquisition information)
- e) What will be the new portfolio risk for Arifah?
- f) Provide simple comment on Arifah’s decision by comparing her portfolio return and risk.
Transcribed Image Text:QUESTION 3
Arifah is considering letting go one of her investment. The followings are some information related
to her portfolio:
Table A: Acquisition Info
Stock A
Stock B
Stock C
Acquisition price
6-month Average return
St. deviation
RM5 per unit
RM2 per unit
RM10 per unit
3%
2%
2.5%
6%
1.5%
3%
Units owned
1000
500
400
Table B: Portfolio-related info
Covariance between A and B
20
Covariance between A and C
15
Covariance between B and C
-10
Table C: Reports on Potential Return obtained from Stock Analyst Firm
Probability
Economic condition in a month
Potential return
time
Stock A
Stock B
Stock C
Good
0.2
10%
5%
6%
Moderate
0.5
7%
2%
5%
Bad
0.3
3%
-3%
1%
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