Talal can pick one of two investment portfolios - A and B. Each requires an initial outlay of $100,000 and each has a most likely annual rate of return of 18%. Estimated the returns associated with each investment. Past estimates indicate that the probabilities of the bessimistic, most likely, and optimistic outcomes are 30%, 50%, and 20%, respectively. Note that the sum of these probabilities must equal 100%; that is, they must be based on all the alternatives considered. Question: 1. Explain him about risk aversion, risk neutrality and risk seeking on the bases of standard deviation and coefficient of variation. Details Asset A Asset B Initial Investment $100,000 $100,000 Rate of Return - Pessimistic 16% 10% Rate of Return - Most likely 18% 18% Rate of Return - Optimistic 20% 26%
Talal can pick one of two investment portfolios - A and B. Each requires an initial outlay of $100,000 and each has a most likely annual rate of return of 18%. Estimated the returns associated with each investment. Past estimates indicate that the probabilities of the bessimistic, most likely, and optimistic outcomes are 30%, 50%, and 20%, respectively. Note that the sum of these probabilities must equal 100%; that is, they must be based on all the alternatives considered. Question: 1. Explain him about risk aversion, risk neutrality and risk seeking on the bases of standard deviation and coefficient of variation. Details Asset A Asset B Initial Investment $100,000 $100,000 Rate of Return - Pessimistic 16% 10% Rate of Return - Most likely 18% 18% Rate of Return - Optimistic 20% 26%
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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Transcribed Image Text:Talal can pick one of two investment portfolios - A and B. Each requires an initial outlay of
$100,000 and each has a most likely annual rate of return of 18%. Estimated the returns
associated with each investment. Past estimates indicate that the probabilities of the
pessimistic, most likely, and optimistic outcomes are 30%, 50%, and 20%, respectively.
Note that the sum of these probabilities must equal 100%; that is, they must be based on
all the alternatives considered.
Question:
1. Explain him about risk aversion, risk neutrality and risk seeking on the bases of
standard deviation and coefficient of variation.
Details
Asset A
Asset B
Initial Investment
$100,000
$100,000
Rate of Return - Pessimistic
16%
10%
Rate of Return - Most likely
18%
18%
Rate of Return - Optimistic
20%
26%
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