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 8% in asset J, 51% in asset K, and 41% 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 intermediate calculations to at least seven (7) decimal places. The input instructions, phrases in parenthesis after each answer box, apply for the answers you will type. Data Table of (Click on the following icon in order to copy its contents into a spreadsheet.) Return on Asset J in Return on Return on State of Probability of State Asset K in Economy Boom Asset L in State State State 0.28 0.070 0.220 0.140 0.280 Growth 0.39 0.070 0.070 0.070 0.200 Stagnant Recession ncut 0.22 0.065 0.075 0.11 0.120 -0.220
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 8% in asset J, 51% in asset K, and 41% 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 intermediate calculations to at least seven (7) decimal places. The input instructions, phrases in parenthesis after each answer box, apply for the answers you will type. Data Table of (Click on the following icon in order to copy its contents into a spreadsheet.) Return on Asset J in Return on Return on State of Probability of State Asset K in Economy Boom Asset L in State State State 0.28 0.070 0.220 0.140 0.280 Growth 0.39 0.070 0.070 0.070 0.200 Stagnant Recession ncut 0.22 0.065 0.075 0.11 0.120 -0.220
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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Pls answer all questions with explanations. Rounded to four decimal places. Thx
Transcribed Image Text:**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 8% in asset J, 51% in asset K, and 41% 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 intermediate calculations to at least seven (7) decimal places. The input instructions, phrases in parenthesis after each answer box, only apply for the answers you will type.*
**Data Table**
- **State of Economy, Probability of State, Return on Asset J in State, Return on Asset K in State, Return on Asset L in State**
- Boom, 0.20, 0.070, 0.220, 0.280
- Good, 0.38, 0.090, 0.140, 0.100
- Stagnant, 0.29, 0.070, 0.050, 0.075
- Recession, 0.11, 0.070, -0.120, -0.220
The data table provides the probability distribution of returns for three assets (J, K, L) across different economic states. Each state—Boom, Good, Stagnant, Recession—has an associated probability and expected return for each asset. This information is critical for calculating the expected return, variance, and standard deviation for each asset and the portfolio as a whole, based on specified weights.
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