Expected return and standard deviation. Use the following information to answer the questions:a. What is the expected return of each asset?b. What is the variance and the standard deviation of each asset?c. What is the expected return of a portfolio with 12% in asset J, 52% in asset K, and 36% in asset L?d. What is the portfolio's variance and standard deviation using the same asset weights from part (c)?Hint: Make sure to round all intermediateanswers you will type.a. What is the expected return of asset J?(Round to four decimal places.)Data table(Click on the following icon in order to copy its contents into a spreadsheet.)Return onAsset J inState ofEconomyBoomGrowthStagnantRecessionProbabilityof State0.240.360.210.19State0.0500.0500.0500.050Return onAsset K inState0.2300.1200.020-0.060Return onAsset L inState0.2500.1900.065- 0.190

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a. What is the expected return of each asset? b. What is the variance and the standard deviation of each asset? c. What is the expected return of a portfolio with 12% in asset J, 52% in asset K, and 36% in asset L? d. What is the portfolio's variance and standard deviation using the same asset weights from part (c)?

a. What is the expected return of each asset? b. What is the variance and the standard deviation of each asset? c. What is the expected return of a portfolio with 12% in asset J, 52% in asset K, and 36% in asset L? d. What is the portfolio's variance and standard deviation using the same asset weights from part (c)?

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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Uncorrelated assets A and B have standard deviation of return 0.3 and 0.4 respectively. If a denotes the proportion invested in A, which value of a leads to the Minimum Variance Portfolio? A. 0.55 B. 0.64 C. 0.12 D. 0.80 .
4. Suppose there are three uncorrelated assets. Each has a variance of 1.0 and expected rates of return are 1, 2, and 3, respectively. For this example, short sales are allowed. Do the following: a. Find the minimum variance portfolio for the following desired expected portfolio rates of return: 1.0, 1.5, 2.0, 2.5, and 3.0. b. Sketch these on the return versus risk plot (you will need to use the standard deviation of the portfolio, which clearly equals sqrt(w1^2+w2^2+w3^3), where wi are the weights). c. Suppose we have a risk-free asset with a return of 2%. Modify your plot for b.
Which of the following statements are correct? I.The standard deviation is a measure of risk.II.The variance of yearly returns is roughly the variance of monthly returns multiplied with 12.III.To decide whether asset A is more risky than asset B we can either use their standard deviations or their variances. Group of answer choices II and III only I, II and III I and II only I and III only
The following provides information regarding Assets X and Y. Calculate the expected rate of return, variance, standard deviation, and coefficient of variation for the two assets. Which asset is a better investment?
An asset has normally-distributed returns, with mean of 10.6% and standard deviation of 14.8%. What is the 2% VaR (value at risk) return? Enter answer in percents.
Which of the following measures the total risk of a portfolio? A. Standard Deviation B. Correlation Coefficient C. Beta D. Alpha
Consider two portfolios, Portfolio A and Portfolio B, with the following performance metrics: - Portfolio A has a Sharpe Ratio of 0.8, a Treynor Ratio of 1.2, and a Jensen's Alpha of 0.5. - Portfolio B has a Sharpe Ratio of 1.2, a Treynor Ratio of 0.9, and a Jensen's Alpha of -0.2. Which of the following statements is correct regarding the performance of these portfolios? Portfolio A has a higher risk-adjusted return when the risk is measured by the beta. Portfolio B outperforms the risk-adjusted return suggested by CAPM. Portfolio A and B have similar risk-adjusted returns, but Portfolio B exhibits negative abnormal returns. Portfolio B has a higher risk-adjusted return when the risk is measured by the standard deviation. Portfolio A outperforms Portfolio B in terms of both risk-adjusted return and abnormal returns suggested by CAPM.
a. What are the expected return and standard deviation of your client's portfolio?
On the expected return (Y-axis) vs. variance (X-axis) graph, investors will prefer portfolios that lie to the: 1) Southeast 2) Northeast 3) Northwest 4) Southwest
How are the following used on a stand-alone and a portfolio basis? 1. Standard Deviation 2. Variance 3. Covariance
A person is interested in constructing a portfolio. Two stocks are being considered. Letx = percent return for an investment in stock 1, and y = percent return for an investment instock 2. The expected return and variance for stock 1 are e(x) = 8.45% and Var(x) = 25.The expected return and variance for stock 2 are e(y) = 3.20% and Var(y) = 1. Thecovariance between the returns is sxy = −3.a. what is the standard deviation for an investment in stock 1 and for an investment instock 2? Using the standard deviation as a measure of risk, which of these stocks isthe riskier investment?
Chose one of the options below The Mean-Variance Optimization (MVO) model finds the portfolio weights with the smallest variance for a given level of expected return, given the individual assets' expected returns, variances and correlations. The Black-Litterman model is the mean-variance optimization model run backwards, that is, the MVO model solved for variables other than the weights. The Black-Litterman model solves for the A. asset pairwise correlations B. asset standard deviations C. portfolio weights D. asset expected returns

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