nvestment advisors recommend risk reduction through international diversification. International investing allows you to take advantage of the potential for growth in foreign economies, particularly in emerging markets. Janice Wong is considering investment i either Europe or Asia. She has studied these markets and believes that both markets will be influenced by the U.S. economy, which has a 16% chance for being good, a 55% chance for being fair, and a 29% chance for being poor. Probability distributions of the returns for these markets are given in the accompanying table State of the U.S. Economy Good Fair Poor Returns in Returns in Asia 10% 13% -7% Europe 16% SX -10% a. Find the expected value and the standard deviation of returns in Europe and Asia. (Round intermediate calculations to at least 4 decimal places and final answers to 2 decimal places.) Europe dengan Asia
nvestment advisors recommend risk reduction through international diversification. International investing allows you to take advantage of the potential for growth in foreign economies, particularly in emerging markets. Janice Wong is considering investment i either Europe or Asia. She has studied these markets and believes that both markets will be influenced by the U.S. economy, which has a 16% chance for being good, a 55% chance for being fair, and a 29% chance for being poor. Probability distributions of the returns for these markets are given in the accompanying table State of the U.S. Economy Good Fair Poor Returns in Returns in Asia 10% 13% -7% Europe 16% SX -10% a. Find the expected value and the standard deviation of returns in Europe and Asia. (Round intermediate calculations to at least 4 decimal places and final answers to 2 decimal places.) Europe dengan Asia
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
A1
Transcribed Image Text:Investment advisors recommend risk reduction through international diversification International investing allows you to take
advantage of the potential for growth in foreign economies, particularly in emerging markets. Janice Wong is considering investment in
either Europe or Asia. She has studied these markets and believes that both markets will be influenced by the U.S. economy, which
has a 16% chance for being good, a 55% chance for being fair, and a 29% chance for being poor. Probability distributions of the returns
for these markets are given in the accompanying table
State of the U.S.
Economy
Good
Fair
Poor
Returns in Returns in
Asia
18%
13%
-7%
Expected value
Standard deviation
Europe
16%
SX
-10%
a. Find the expected value and the standard deviation of returns in Europe and Asia. (Round intermediate calculations to at least 4
decimal places and final answers to 2 decimal places.)
Europe
7:%
O Investment in Europe
O Investment in Asia
Asia
b. What will Janice pick as an investment if she is risk neutral?
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