Use the following information to answer the two questions below. State of Prob. of the the economy state of economy 0.75 0.25 Boom Bust 4.1 Rate of return if state occurs Stock A Stock B 0.15 16.1 0.05 4 You MUST use 4 digits in every calculation you do in order for your answer to be the same as the one in the system. When entering your answer, round to the nearest 0.01% but do not enter the % sign. For example, if your answer is 3.484 % enter 3.48; if your answer is 0.12013 then enter 12.01 What is the expected return of a portfolio with 80% in asset A and 20% in Asset B? 0.02 0.02 What is the variance of the portfolio with 80% in asset A and 20% in Asset B?
Use the following information to answer the two questions below. State of Prob. of the the economy state of economy 0.75 0.25 Boom Bust 4.1 Rate of return if state occurs Stock A Stock B 0.15 16.1 0.05 4 You MUST use 4 digits in every calculation you do in order for your answer to be the same as the one in the system. When entering your answer, round to the nearest 0.01% but do not enter the % sign. For example, if your answer is 3.484 % enter 3.48; if your answer is 0.12013 then enter 12.01 What is the expected return of a portfolio with 80% in asset A and 20% in Asset B? 0.02 0.02 What is the variance of the portfolio with 80% in asset A and 20% in Asset B?
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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Capital asset pricing model, also known as CAPM, shows the relationship between the expected return of the investment and the market at risk. This concept is basically used particularly in the case of stocks or shares. It is also used across finance for pricing assets that have higher risk identity and for evaluating the expected returns for the assets given the risk of those assets and also the cost of capital.
Question
Transcribed Image Text:Use the following information to answer the two questions below.
State of
Prob. of the
state of economy.
0.75
the economy
Boom
Bust
4.1
0.25
Rate of return if state occurs
Stock A
Stock B
16.1
0.15
0.05
0.02
4
You MUST use 4 digits in every calculation you do in order for your answer to be the
same as the one in the system. When entering your answer, round to the nearest
0.01% but do not enter the % sign. For example, if your answer is 3.484% enter 3.48:
if your answer is 0.12013 then enter 12.01
What is the expected return of a portfolio with 80% in asset A and 20% in Asset B?
0.02
What is the variance of the portfolio with 80% in asset A and 20% in Asset B?
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