Possible returns and their probabilities for an asset is given in the table below. The expected return is 30.25%. Calculate the standard deviation of the asset's return. Probability 0.40 0.45 0.15 O 13.92 % O 17.84% O 18.55% 19.09% O 16.59% Return 0.52 0.17 0.12

Possible returns and their probabilities for an asset is given in the table below. The expected return is 30.25%. Calculate the standard deviation of the asset's return. Probability 0.40 0.45 0.15 O 13.92 % O 17.84% O 18.55% 19.09% O 16.59% Return 0.52 0.17 0.12

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

See similar textbooks

Related questions

Q: The expected return for an individual asset is the sum of expected returns in each state of the…

A: Expected rate of return is the most likely and probable and average rate of return that can be…

Q: • If the actual value of a time series at time t and the forecast value for time t is denoted by At…

A: Option A: The correct formula for Mean Absolute Deviation Option B: It is the formula for Mean…

Q: Use the following information to answer the questions. State of Economy Probability of State…

A: Given : State of Economy Probability Return on Asset D Return on Asset E Return on Asset F Boom…

Q: The standard deviation of the returns of a portfolio is the geometric average of the standard…

A: Portfolio standard deviation measures the fluctuations in a portfolio how volatile a portfolio is…

Q: a. If Sharon were risk neutral, which investment would she select? Explain why. b. If she were risk…

A: Risk Neutral-This type of investor is insensitive to risk i.e., while making investment decision,…

Q: 4. Given the probability and returns associated with each state, what is the expected return? What…

A: Calculations of expected return and standard deviation: Excel workings:

Q: What is the total variance of the following portfolio including 2 assets invested in the ratio of…

A: Formula to be used: Portfolio variance=(WA2 x σ2A)+(WB2 x σ2B)+ (2 x WA x σA x WB x σB x r) Data…

Q: Given the following probability distribution, what is the standard deviation of returns for Security…

A: standard deviation of security is computed by following formula:-standard deviation of security =…

Q: Given there are two assets making up a portfolio where each asset has the following characteristics:…

A: “Hi There, thanks for posting the question. But as per Q&A guidelines, we must answer the first…

Q: For minimum variance portfolio,the weight of Asset A1 Ltd in two asset portfolio ,having correlation…

Q: Given the following probability distribution, what is the standard deviation of returns for Security…

A: Mean= Σ [xi*P(xi)]Standard deviation =sqrt(Σ (xi - x̄)^2*P(xi))

Q: Which of the following statements is correct? Select one: a. Assuming a correlation…

A: The combination of stock will reduce the overall risk of the portfolio but it it depends on the…

Q: Expected return and standard deviation. Use the following information to answer the questions: a.…

A: Expected return, variance and standard deviation of each asset is calculated in excel

Q: Which of the following assets dominates Asset X that has 9% expected return andstandard deviation of…

A: The objective of the question is to identify which asset among Asset V, Asset R, Risk-free asset,…

Q: Expected return and standard deviation a. What is the expected return of asset b?

A: The expected return is the return that an investor expects on its investment under various…

Q: How do you calculate the value at a node in a binomial tree? A. As a present value of the two…

A: A binomial tree is a graphical representation of the different intrinsic values that an option could…

Q: a. What is the expected return of each asset? b. What is the variance and the standard deviation of…

Q: Which asset in the following table has the most market risk

A: Systematic risk is the inherent unpredictability and volatility connected to the economy or market.…

Q: The probability distributions of expected returns for the assets are shown in the following table:…

A: We need to compute return and standard deviation for asset A.

Q: Consider two assets with expected return R1=0.22,R2=0.55and variance are s1=0.80, s2=0.88 and…

A: Computation of expected return and variance is enumerated as below:

Q: Which asset in the following table has the most market risk (also known as systematic or non-…

A: Systematic risk refers to the type of risk which has an impact on the entire market. Also known as…

Q: There are three assets with the rates of return r₁ = 214 +21B+1, 7₂ = -31₁+61B-2, 73 = 514-18 +4,…

A: To find the portfolio with the minimum variance, we need to solve the following optimization…

Q: How would you characterize the correlations of returns of the two assets making up each of the two…

A: Portfolio can be defined as an investment which consists of multiple stocks. The objective of an…

Q: 16. What is the total variance of the following portfolio including 2 assets invested in the ratio…

A: Formula to be used: Portfolio variance=(WA2 x σ2A)+(WB2 x σ2B)+ (2 x WA x σA x WB x σB x r) Data…

Q: Assume there are only three risky assets in which to invest, A, B and C. The expected return and…

A: Here, SecurityReturnStandard DeviationStock A8%0.04Stock B10%0.05Stock C7%0.02

Q: Given Portfolio 1 Expected Return= 0.15 Portfolio variance = 0.001 Standard Deviation = 0.0316…

A: A portfolio is the combination of various financial assets into one basket with the aim to earn…

Q: The standard deviation of return on investment a is 0.10, while the standard deviation of return on…

A: It is a case of calculation of covariance when the data of standard deviation and correlation…

Q: Asset 1 has a standard deviation of 0.10 and an expected return of 7%. Asset 2 has a standard…

A: Standard deviation of Asset 1 (sd1) = 0.10Expected return of Asset 1 (Er1) = 7%Standard deviation of…

Q: Find the correlation of assets S and T if the standard deviation of S is 4 and standard deviation of…

A: Correlation is a statistic that helps in measuring the degree to which two variables move in…

Q: The expected value and the standard deviation of returns for asset A is Asset A Possible Outcomes…

A: Expected value:Possible outcomes Probability (a)Returns % (b)Expected value…

Q: Assume that we have three assets. The first one has expected return μ1 = 10% and standard…

A: Standard deviation of an asset denotes the variability in return of the asset. Higher will be the…

Q: a) XVW Ltd. currently holds a portfolio containing two assets; Asset 1 and Asset 2. If Er1 = 0.25,…

A: A Minimum Variance Portfolio (MVP) is a concept in finance and investment that refers to a portfolio…

Q: 2) Calculate the envelope set (frontier) for the following four assets and show that the individual…

A: In this question we will be calculating the Envelope Set for the four assets and plotting the…

Q: Assuming that the rates of return associated with a given asset investment are normally distributed;…

A: a) Calculation of standard deviation:Standard deviation is 0.3516.Standard deviation can be derived…

Q: Asset A has a standard deviation of 0.17, and asset B has a standard deviation of 0.52. Assets A and…

A: It is a case where the portfolio consists of three assets. The two assets are risky assets and the…

Q: Compute the VaR(95%) and ES(95%) of the portfolio managed by Absolute Asset Management if its…

A: A firm with revenue given by R=102-e2 e=working efforts of a typical employee Profit =Revenue - Cost…

Q: Suppose two asset returns are described by a two factor model, n- 0% + 11 + 1.8/2 + e 12= -1% + 21 +…

A: Here, Volatility of First Factor is 30% Volatility of Second Factor is 10% Correlation between two…

Q: Given the following probability distribution, what are the expected return and the standard…

A: The expected return is the return expected from the investment made. The expected return in this…

Q: e. Calculate the Portfolio Return when you know that its composition is as follows: Asset A: Weight…

A: Portfolio Return: The gain or loss generated by an investment portfolio encompassing a variety of…

Q: Which of the following statements regarding standard deviation is TRUE: Group of answer choices…

A: Standard Deviation is a measure of risk. Higher the standard deviation, higher will be the risk and…

Question

Possible returns and their probabilities for an asset is given in the table below. The expected return is 30.25%. Calculate the
standard deviation of the asset's return.
Probability
0.40
0.45
0.15
13.92%
O 17.84 %
18.55%
O 19.09%
16.59%
Return
0.52
0.17
0.12

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1: Given data:

VIEW

Step 2: Find the standard deviation of the portfolio:

VIEW

Solution

VIEW

Step by step

Solved in 3 steps with 2 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.

Similar questions

Boom Nasional Berhad, find the standard deviation. PROBABILITY RETURN 0.35 8% 0.20 3% 0.20 20% 025 15%
2. The following table gives information on the return and variance of assets A and B, whose covariance is 0.0003: A B 0} 0,0009 0,0012 E (R₂) 0,05 0,06 a. Does the portfolio (1/3 of A and 2/3 of B) dominate the portfolio (2/3 of A and 1/3 of B)? b. Does the portfolio (1/2, 1/2) belong to the efficient frontier? c. If there were the possibility of lending and borrowing at 2%, would the portfolio (1/2, 1/2) belong to the new efficient frontier?
You are given the following possible returns for Security J. Given this information, determine the coefficient of variation for Security J State Probability G 1 30% 10% 25% 18% 14% 24% 27% 2 3 4 O 0.3907 O 0.3847 O 0.3721 O 0.4040 00.3597 31%
Provide a descriptive formula for each of the following (e.g., Total risk =?+?): a. Total risk= b. Discount rate= c. Adjusted NPV=
Consider the information below, compute the expected return, variance, and standard deviation. Show the solution. Probability Return of Assets 25% .30 25% .050 25% .100 25% .280
Uncorrelated assets A and B have standard deviation of return 0.3 and 0.4 respectively. If a denotes the proportion invested in A, which value of a leads to the Minimum Variance Portfolio? A. 0.55 B. 0.64 C. 0.12 D. 0.80 .
Which of the following statements are correct? I.The standard deviation is a measure of risk.II.The variance of yearly returns is roughly the variance of monthly returns multiplied with 12.III.To decide whether asset A is more risky than asset B we can either use their standard deviations or their variances. Group of answer choices II and III only I, II and III I and II only I and III only
Given the following probability distribution, what is the expected return and the standard deviation of returns for Security J? The answer choice lists expected return and standard deviation in the respective order. State 1 2 3 Pri 0.2 O 12%; 5.18% O 15%; 3.16% O 15%; 6.50% 0.6 0.2 O 20%; 5.00% 15%; 10.00% rj 10% 15 20
The expected return for asset A is 4.00% with a standard deviation of 9.00%, and the expected return for asset B is 6.75% with a standard deviation of 3.00%. Based on your knowledge of efficient portfolios, fill in the blanks in the following table with the appropriate answers. Proportion of Portfolio in Security A WA 1.00 0.75 0.50 0.25 0.00 Proportion of Portfolio in Security B WB 0.00 0.25 0.50 0.75 1.00 Expected Portfolio Return FP 4.00% 4.69% 6.06% 6.75% Standard Deviation Op Case I (PAB= -0.4) 6.5 4.1 2.5 3.0 Standard Deviation op Case II (PAB= 0.3) 9.0 5.2 3.6 3.0 The minimum risk portfolio allocation to asset A within the portfolio for case III is. Therefore, you are better off Standard Deviation op Case III (PAB=0.8) 9.0 7.4 5.8 ▼ 3.0
Find the correlation of assets A and B if the standard deviation of A is 4 and standard deviation of asset B is 2. The covariance of asset A and B is 1.8268.
The returns on assets C and D are strongly correlated with a correlation coefficient of 0.80. The variance of returns on C is 0.0009, and the variance of returns on D is 0.0036. What is the covariance of returns on C and D? Give typing answer with explanation and conclusion
1. Please, compute mean returns, variances and covariance among the two assets of the IBEX35 and present the vector of returns and the matrix.

SEE MORE QUESTIONS

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS