Consider an investment whose annual return is normally distributed with a mean of 6% and a standard deviation of 14%. (a) What is the probability that I lose money on this investment, in any given year? Please express your answer as a percentage, to the nearest ten basis points. Probability of Losing Money = (b) What is the 10% value at risk on the investment? Please express your answer as a percentage, to the nearest ten basis points. VaR 0.1 = % % (c) If I invest in this asset, how much should expect to lose in my worst year out of 10? Please express your answer as a percent, to the nearest ten basis points. %

Consider an investment whose annual return is normally distributed with a mean of 6% and a standard deviation of 14%. (a) What is the probability that I lose money on this investment, in any given year? Please express your answer as a percentage, to the nearest ten basis points. Probability of Losing Money = (b) What is the 10% value at risk on the investment? Please express your answer as a percentage, to the nearest ten basis points. VaR 0.1 = % % (c) If I invest in this asset, how much should expect to lose in my worst year out of 10? Please express your answer as a percent, to the nearest ten basis points. %

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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Capital asset pricing model (CAPM) For the asset shown in the following table, use the capital asset pricing model to find the required return. (Click on the icon here in order to copy the contents of the data table below into a spreadsheet.) Risk-free rate, RF 5% Market return, m 10% ****** The required return for the asset is%. (Round to two decimal places.) Beta, b 0.6
Consider an investment with the following probability distribution: Probability: Payoff: 0.40 41.0% 0.40 -6.0 0.20 -20.0 Calculate the expected return. Do not round intermediate calculations. Round your answer to two decimal places. _____% Calculate the standard deviation. Do not round intermediate calculations. Round your answer to two decimal places. _____% Calculate the coefficient of variation. Do not round intermediate calculations. Round your answer to two decimal places. _____
By investing in a particular stock, a person can make a profit in one year of $3900 with probability 0.4 or take a loss of $800 with probability 0.6. What is this person's expected gain?
Suppose you have a project that has a 0.4 chance of tripling your investment in a year and a 0.6 chance of halving your investment in a year. What is the standard deviation of the rate of return on this investment? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places.) What is the standard deviation?
You invest $96 in a risky asset and the T-bill. The risky asset has an expected rate of return of 19% and a standard deviation of 0.22, and a T-bill with a rate of return of 4%. A portfolio that has an expected outcome of $110 is formed by investing what dollar amount in the risky asset? Round your answer to the nearest cent (2 decimal places).
If the value of sustainable investing is $158.7 and the discount rate is 5.8% while the value of non-sustainable investing is $22.81 and the expected value of the company is $27.14. What is the assumed probability of being sustainable given a 5 year horizon? (Answer in percent to 2 decimals)
Year End Index Realized Return 2000 23.6% 2001 24.7% 2002 30.5% 2003 9.0% 2004 -2.0% 2005 -17.3% 2006 -24.3% 2007 32.2% 2008 4.4% 2009 7.4%
Investor has had the following returns in the Magic Fund for the past 4 years: 15%, 25%, -30%, 18%. c) State whether the annual geometric return (assume positive) should be higher, lower, or the same as the annual arithmetic return. Neither calculation nor explanation is necessary. d) State which measure, annual arithmetic return or annual geometric return, better represents how an investment performed over time. Neither calculation nor explanation is necessary.
State the return rate (in %) for your optimal portfolio.
Ten annual returns are listed below. -19.9%, 16.6%, 18%, -50 %, 43.3%, 1.2%, -16.5 %, 45.6%, 45.2%, a. What is the arithmetic average return over the 10-year period? b. What is the geometric average return over the 10-year period? c. If you invested $100 at the beginning of the period, how much would you have at the end?
Which of the following investments will experience the largest change in its market value as a result of changes in the level of interest rates (we are talking about the absolute value of the change, up or down)? Suppose interest rates go up or down by 50 basis points (0.5%). Rank the investments from 1 to 4 where a 1 is the most affected (largest absolute change in value) while a 4 is the least affected (smallest absolute change in value). A: $1 million invested in 3-month Treasury bills. 请选择~ B: $1 million invested in STRIPS (zero coupons) maturing in three years. |请选择 C: $1 million invested in a Treasury note maturing in three years. The note pays a 5% annual coupon. |请选择︾ D: $1 million invested in a Treasury note maturing in three years. The note pays a 10.0% annual coupon. |请选择

Consider a risky portfolio. The end-of-year cash flow derived from the portfolio will be either $150,000 or $290,000 with equal probabilities of 0.5. The alternative risk-free investment in T-bills pays 3% per year. Required: a. If you require a risk premium of 7%, how much will you be willing to pay for the portfolio? b. Suppose that the portfolio can be purchased for the amount you found in (a). What will be the expected rate of return on the portfolio? c. Now suppose that you require a risk premium of 12%. What price are you willing to pay? Complete this question by entering your answers in the tabs below. Required A Required B Required C If you require a risk premium of 8%, how much will you be willing to pay for the portfolio? Note: Do not round your intermediate calculations. Round your answer to the nearest whole dollar amount. Price Required A Required B >

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