High Beta BUSI 2093 | UNIT 9 | Risk and Return QUESTION 2.1 Low Beta High Standard Deviation RISKY MEDIUM LOW RISK RISKY MEDIUM LOW RISK RISKY MEDIUM LOW RISK Low Standard Deviation High Risk & High Expected Return Low Risk & Lower Expected Return RISKY MEDIUM LOW RISK RISKY MEDIUM LOW RISK RISKY MEDIUM LOW RISK

Example 3 Inns oont alafrA Following Example 2, consider a porfolio with three assets S1, S2 and S3 which have expected rates of return 0.1,0.15 and 0.2 respectively, and variance-covariance matrix odni tanoma bszt a aitevi ot botoly 0.1 0.1 -0.1 0.1 0.2 0.1 ololles V = -0.1 0.1 0.6 vo ) isaas sod slais a at gaiteoo ottg ndi oda vodT (aldanoitesup als ot-lais wod ibuadala abnod on a) What is the optimal portfolio when up = worod of sidad = 0.2. adt yhalinie ini ba moe ja SOLUTION lo ano ot b) Use this piece of information and the earlier optimal portfolios from la aao e. Example 2 to find the quadratic equation relating of and up. ni bstni sd SOLUTION tar oad o bo s e) Hence draw a plot of the solutions, and identify the frontier port- Ldon to slar folios. it SOLUTION ods Btvni gatela dt

what are the axcess rates?

Boom Nasional Berhad, find the standard deviation. PROBABILITY RETURN 0.35 8% 0.20 3% 0.20 20% 025 15%

Probability Returns 0.15 0.20 2.0.35 0.20 0.10 8.65 Based on the above information, what is the risk (standard deviations) ? 2.94 3,92 10% 8,68 12% 15% 17% 20%

M102LON/JAN 3. Security A has the following probability distribution of returns: Scenario Probability Return 1 0.1 15% 2 0.8 25% 0.1 35% What is the variance for Security A? a. 0.002 b. 0.020 С. 0.200 d. 0.300 3.

The possible returns of a security I and research returns under three possible states are as follows. Probability % market % security 0.2 15 10 0.5 13 16 0.3 25 30 The risk free rate is 9%, determine the required rate of return of security I and sate whether it is correctly valued. 12-marks] 20 Ri= E(R) XW

v. 2

Seidsmong ed liw onon aysh bajosios vimobnsi à to Juo ferit vtilidadorq adi ai tsrW Task 2: Assume that a risk manager estimates the following probabilities of various losses for a certain risk: Amount of Loss, EUR Probability of Loss 0.40 0.60 225 350 1. Given the probability distribution, find the expected loss.

To 4-dogot accuracy please compute The standard deviation of IWM return and  the standard deviation of EEM return?