An investor holds a portfolio of stocks and is considering investing in the DBB Company. The firm's prospects look neutral and you estimate the following probability distribution of possible returns: Conditions Returns on DBB Returns on DVI Recession 0.10 -30% -15% Below Average 0.20 -15% 4% Average 0.40 15% 8% Above Average 0.20 28% 20% Вoom 0.10 40% 22% a) b) c) How much is the expected return for DBB? How much is the coefficient of variation for DBB? Now let's say you want to add another asset, DVI, to your portfolio. You sell 20% of DBB to purchase DVI. How much is your expected return for this portfolio? How much is the coefficient of variation for the new portfolio? d)
An investor holds a portfolio of stocks and is considering investing in the DBB Company. The firm's prospects look neutral and you estimate the following probability distribution of possible returns: Conditions Returns on DBB Returns on DVI Recession 0.10 -30% -15% Below Average 0.20 -15% 4% Average 0.40 15% 8% Above Average 0.20 28% 20% Вoom 0.10 40% 22% a) b) c) How much is the expected return for DBB? How much is the coefficient of variation for DBB? Now let's say you want to add another asset, DVI, to your portfolio. You sell 20% of DBB to purchase DVI. How much is your expected return for this portfolio? How much is the coefficient of variation for the new portfolio? d)
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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Please do it in excel
Transcribed Image Text:)An investor holds a portfolio of stocks and is considering investing in the DBB Company. The
firm's prospects look neutral and you estimate the following probability distribution of possible
returns:
Conditions
P
Returns on DBB
Returns on DVI
Recession
0.10
-30%
-15%
Below Average
0.20
-15%
4%
Average
0.40
15%
8%
Above Average
0.20
28%
20%
Вoom
0.10
40%
22%
a)
b)
c)
to purchase DVI. How much is your expected return for this portfolio?
d)
How much is the expected return for DBB?
How much is the coefficient of variation for DBB?
Now let's say you want to add another asset, DVI, to your portfolio. You sell 20% of DBB
How much is the coefficient of variation for the new portfolio?
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