Use the following information to answer the questions. State of Economy Probability of State Return on Asset D in State Return on Asset E in State Return on Asset F in State Boom 0.34 0.08 0.29 0.19 Normal 0.55 0.08 0.17 0.11 Recession 0.11 0.08 −0.24 −0.09 a. What is the expected return of each asset? b. What is the variance of each asset? c. What is the standard deviation of each asset?
Use the following information to answer the questions. State of Economy Probability of State Return on Asset D in State Return on Asset E in State Return on Asset F in State Boom 0.34 0.08 0.29 0.19 Normal 0.55 0.08 0.17 0.11 Recession 0.11 0.08 −0.24 −0.09 a. What is the expected return of each asset? b. What is the variance of each asset? c. What is the standard deviation of each asset?
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
Expected return and standard
deviation.
Use the following information to answer the questions.
State of
Economy
|
Probability
of State
|
Asset D in
State
|
Return on
Asset E in
State
|
Return on
Asset F in
State
|
|
||||
Boom
|
|
0.34
|
|
0.08
|
|
0.29
|
|
0.19
|
|
Normal
|
|
0.55
|
|
0.08
|
|
0.17
|
|
0.11
|
|
Recession
|
|
0.11
|
|
0.08
|
|
−0.24
|
|
−0.09
|
|
a. What is the expected return of each asset?
b. What is the variance of each asset?
c. What is the standard deviation of each asset?
Hint: Make sure to round all intermediate calculations to at least seven (7) decimal places. The input instructions, phrases in parenthesis after each answer box, only apply for the answers you will type.
a. What is the expected return of asset D?
What is the expected return of asset E?
What is the expected return of asset F?
b. What is the variance of asset D?
What is the variance of asset E?
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