Risk Treasury Index All World Expected Return Investment (Standard Deviation) Allocation Fund Fund 100% 5.50% 4.60% 75% 25% 6.08% 5.44% 50% 50% 6.65% 9.40% 25% 75% 4 7.23% 14.06% 0% 100% 7.80% 18.90% Portfolio Return vs Risk 20.00% 18.90% 18.00% 16.00% 14.06 14.00% 12.00% 9.40 10.00% 8.00% 5.44% 6.00% 4.60% 4.00% 2.00% 0.00% 5.50% 5.00% 6.00% 6.50% 7.00% 7.50% 8,00% Expected Return a. 2 b. 3 c. 5 d. 1 Risk (Standard Deviation)
Unitary Method
The word “unitary” comes from the word “unit”, which means a single and complete entity. In this method, we find the value of a unit product from the given number of products, and then we solve for the other number of products.
Speed, Time, and Distance
Imagine you and 3 of your friends are planning to go to the playground at 6 in the evening. Your house is one mile away from the playground and one of your friends named Jim must start at 5 pm to reach the playground by walk. The other two friends are 3 miles away.
Profit and Loss
The amount earned or lost on the sale of one or more items is referred to as the profit or loss on that item.
Units and Measurements
Measurements and comparisons are the foundation of science and engineering. We, therefore, need rules that tell us how things are measured and compared. For these measurements and comparisons, we perform certain experiments, and we will need the experiments to set up the devices.
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You are an investment manager for Simple Asset Management, a company that specializes in developing simple investment portfolios consisting of no more than three assets such as stocks, bonds, etc., for investors who like to keep things simple. One of your more popular investments is called the All World Fund and is composed of global stocks with good dividend yields. A client is interested in constructing a portfolio that consists of the All World Fund and the Treasury Index Fund, which consists of U.S. Treasury securities (government bonds). You calculate a 7.8% expected return on the All World Fund with a return standard deviation (a measure of risk) of 18.90%. The expected return of the Treasury Index Fund is 5.50% with a return standard deviation of 4.6%. To analyze the relationship between the two investments, you also calculate the |
Based on the table and graph below, which portfolio seems to offer the best tradeoff in terms of expected return vs. risk?
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