Question 3: your three investments are facing debt ceiling crisis and you believes there are 3 possible outcomes for the market as a whole (1) Strong case, 20% probability; (2) Average case, with a 60% probability; and (3) weak case, with 20% probability, the investor also believes the market would go up by 25% in Strong scenario, go up by 10% in the Average scenario, and go down by -15% in the weak scenario. Calculate the expected return(r ^). Calculate the standard deviation (σ). Note; use the payoff matrix table.
Question 3: your three investments are facing debt ceiling crisis and you believes there are 3 possible outcomes for the market as a whole (1) Strong case, 20% probability; (2) Average case, with a 60% probability; and (3) weak case, with 20% probability, the investor also believes the market would go up by 25% in Strong scenario, go up by 10% in the Average scenario, and go down by -15% in the weak scenario. Calculate the expected return(r ^). Calculate the standard deviation (σ). Note; use the payoff matrix table.
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 3: your three investments are facing debt ceiling crisis and you believes there are 3 possible outcomes for the market as a whole (1) Strong case, 20% probability; (2) Average case, with a 60% probability; and (3) weak case, with 20% probability, the investor also believes the market would go up by 25% in Strong scenario, go up by 10% in the Average scenario, and go down by -15% in the weak scenario.
Calculate the expected return(r ^).
Calculate the standard deviation (σ).
Note; use the payoff matrix table.
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