With reference to the information given above, 1) Discuss the relationship between risk and return of the individual securities. 2) Demonstrate the meaning and advantages of diversification by constructing a portfolio consisting of equal investments in the High-Tech Co. and the Counter- Cyclical Co. Explain your idea and show your work clearly. Perform calculations or quantitative analyses to support your answers where necessary.
With reference to the information given above, 1) Discuss the relationship between risk and return of the individual securities. 2) Demonstrate the meaning and advantages of diversification by constructing a portfolio consisting of equal investments in the High-Tech Co. and the Counter- Cyclical Co. Explain your idea and show your work clearly. Perform calculations or quantitative analyses to support your answers where necessary.
Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter2: Introduction To Spreadsheet Modeling
Section: Chapter Questions
Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...
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With reference to the information given above,
-
1) Discuss the relationship between risk and return of the individual securities.
-
2) Demonstrate the meaning and advantages of diversification by constructing a portfolio consisting of equal investments in the High-Tech Co. and the Counter- Cyclical Co. Explain your idea and show your work clearly.
Perform calculations or quantitative analyses to support your answers where necessary.
Transcribed Image Text:Expected Rate of Return
Counter-
Utility
Treasury Bill Index Fund Company
High-Tech
Company
Cyclical
Company
Scenario
Recession
Probability
20%
5%
-10%
6%
-25%
20%
Near Recession
20%
5%
-6%
7%
-20%
16%
Normal
30%
5%
12%
9%
15%
12%
Near Boom
10%
5%
15%
11%
25%
-9%
Вoom
20%
5%
20%
14%
35%
-20%
Expected
Return
5%
5.9%
9.2%
5%
5.9%
Standard
Deviation
0%
11.94%
2.82%
24.19%
15.69%
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