You are provided with the following sample observations relating to historical rate of returns and their corresponding probabilities for individual assets, Brad and Ford: Brad Ford Obs E(RB) Prob 1 -0.03 0.01 2 0.07 0.09 3 0.10 0.10 4 0.11 0.20 5 0.02 0.05 6 0.15 0.25 7 0.08 0.05 8 0.09 0.10 9 0.12 0.10 10 0.05 0.05 Obs E(RF) Prob 1 -0.01 0.01 2 0.10 0.09 3 0.15 0.10 4 0.20 0.20 5 0.08 0.05 6 0.25 0.25 7 0.13 0.05 8 0.09 0.10 9 0.11 0.10 10 0.06 0.05 Required: Based on the following information (Note: You can use Microsoft Excel functions to expedite your calculations. Please show answers up to two digits after decimal point): a) Calculate the expected rate of return for each individual asset. b) Calculate the standard deviation of returns for each individual asset.
You are provided with the following sample observations relating to historical rate of returns and their corresponding probabilities for individual assets, Brad and Ford: Brad Ford Obs E(RB) Prob 1 -0.03 0.01 2 0.07 0.09 3 0.10 0.10 4 0.11 0.20 5 0.02 0.05 6 0.15 0.25 7 0.08 0.05 8 0.09 0.10 9 0.12 0.10 10 0.05 0.05 Obs E(RF) Prob 1 -0.01 0.01 2 0.10 0.09 3 0.15 0.10 4 0.20 0.20 5 0.08 0.05 6 0.25 0.25 7 0.13 0.05 8 0.09 0.10 9 0.11 0.10 10 0.06 0.05 Required: Based on the following information (Note: You can use Microsoft Excel functions to expedite your calculations. Please show answers up to two digits after decimal point): a) Calculate the expected rate of return for each individual asset. b) Calculate the standard deviation of returns for each individual 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
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You are provided with the following sample observations relating to historical rate of returns and their corresponding probabilities for individual assets, Brad and Ford:
Brad Ford
|
Obs |
E(RB) |
Prob |
|
1 |
-0.03 |
0.01 |
|
2 |
0.07 |
0.09 |
|
3 |
0.10 |
0.10 |
|
4 |
0.11 |
0.20 |
|
5 |
0.02 |
0.05 |
|
6 |
0.15 |
0.25 |
|
7 |
0.08 |
0.05 |
|
8 |
0.09 |
0.10 |
|
9 |
0.12 |
0.10 |
|
10 |
0.05 |
0.05 |
|
Obs |
E(RF) |
Prob |
|
1 |
-0.01 |
0.01 |
|
2 |
0.10 |
0.09 |
|
3 |
0.15 |
0.10 |
|
4 |
0.20 |
0.20 |
|
5 |
0.08 |
0.05 |
|
6 |
0.25 |
0.25 |
|
7 |
0.13 |
0.05 |
|
8 |
0.09 |
0.10 |
|
9 |
0.11 |
0.10 |
|
10 |
0.06 |
0.05 |
Required:
Based on the following information (Note: You can use Microsoft Excel functions to expedite your calculations. Please show answers up to two digits after decimal point):
-
a) Calculate the expected rate of
return for each individual asset. -
b) Calculate the standard deviation of returns for each individual asset.
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