Answered: (b) Suppose you decide to put 60% of…

MATLAB: An Introduction with Applications

6th Edition

ISBN:9781119256830

Author:Amos Gilat

Publisher:Amos Gilat

Chapter1: Starting With Matlab

Section: Chapter Questions

Problem 1P

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(b) Suppose you decide to put 60% of your investment in bonds and 40% in real estate. This means you will use a weighted average w = 0.6x + 0.4y. Estimate your expected percentage return μ_w and risk σ_w.
μ_w = 9.668
σ_w = 9.779

(c) Repeat part (b) if w = 0.4x + 0.6y.
μ_w = 10.842
σ_w = 12.484
1. Compare your results in parts (b) and (c). Which investment has the higher expected return? Which has the greater risk as measured by σ_w?

(A) w = 0.6x + 0.4y produces higher return with greater risk as measured by σ_w.

(B) w = 0.6x + 0.4y produces higher return with lower risk as measured by σ_w.

(D) w = 0.4x + 0.6y produces higher return with lower risk as measured by σ_w.

(E) w = 0.4x + 0.6y produces higher return with greater risk as measured by σ_w.

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