Elizabeth Corporation is starting two new projects. Project A requires an investment of $5,000, has expected return of 16% with standard deviation 14%. Project B has initial investment of $15,000, expected return of 15% with standard deviation 10%. The correlation coefficient between the projects is 0.75. 1- Find the expected return, in dollars, of the portfolio of these two projects. 2- What is the probability that this return is less than $4,000?
Elizabeth Corporation is starting two new projects. Project A requires an investment of $5,000, has expected return of 16% with standard deviation 14%. Project B has initial investment of $15,000, expected return of 15% with standard deviation 10%. The correlation coefficient between the projects is 0.75. 1- Find the expected return, in dollars, of the portfolio of these two projects. 2- What is the probability that this return is less than $4,000?
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
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Elizabeth Corporation is starting two new projects. Project A requires an investment of $5,000, has expected return of 16% with standard deviation 14%. Project B has initial investment of $15,000, expected return of 15% with standard deviation 10%. The correlation coefficient between the projects is 0.75.
1- Find the expected return, in dollars, of the portfolio of these two projects.
2- What is the probability that this return is less than $4,000?
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