and bonds and Portfolio B which consists purely of cryptoc following information on the portfolios: State of market Probability Bear Bull Normal 55% 25% 20% Portfolio Portfolio A B 11% 10% 45% 35% 30% 15%
and bonds and Portfolio B which consists purely of cryptoc following information on the portfolios: State of market Probability Bear Bull Normal 55% 25% 20% Portfolio Portfolio A B 11% 10% 45% 35% 30% 15%
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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Question
a) Calculate the expected returns for both portfolios
b) Calculate the standard deviation for portfolio A.
Transcribed Image Text:Taneal is considering investing in one of two portfolios, Portfolio A which consists of stocks
and bonds and Portfolio B which consists purely of cryptocurrencies. She has collected the
following information on the portfolios:
State of market
Probability
Bear
Bull
Normal
55%
25%
20%
Portfolio Portfolio
A
B
11%
10%
35%
15%
45%
30%
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Follow-up Question
Suppose Taneal is considering combining the two portfolios into a single portfolio. If she invests 60% in Portfolio A and 40% in Portfolio B:
i. Determine the return of the new portfolio
ii. If the standard deviation for portfolio B was 19%, comment on the risk of the new portfolio, supported with calculations.
iii. Should Taneal combine these two portfolios? Why?
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