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
Related questions
Question
Please answer all parts (a-d) with explanations thx.
Transcribed Image Text:**Financial Analysis of Asset Returns**
**Questions:**
a. What is the expected return of each asset?
b. What is the variance and the standard deviation of each asset?
c. What is the expected return of a portfolio with 8% in asset J, 51% in asset K, and 41% in asset L?
d. What is the portfolio's variance and standard deviation using the same asset weights from part (c)?
*Hint: Make sure to round all intermediate calculations to at least seven (7) decimal places.*
**Data Table**
(Copy the table into a spreadsheet for easier calculations.)
| State of Economy | Probability of State | Return on Asset J in State | Return on Asset K in State | Return on Asset L in State |
|------------------|----------------------|----------------------------|----------------------------|----------------------------|
| Boom | 0.28 | 0.070 | 0.220 | 0.280 |
| Growth | 0.39 | 0.070 | 0.140 | 0.200 |
| Stagnant | 0.22 | 0.070 | 0.065 | 0.075 |
| Recession | 0.11 | 0.070 | -0.120 | -0.120 |
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