Chapter 8, Problem 8.1STP

a)

Summary Introduction

To discuss: Expected return for each asset over 3 year period.

Introduction:

In financial context, return is seen as percentage that represents the profit in an investment.

b)

Summary Introduction

To determine: The Standard deviation.

Introduction:

The risk can be defined as the uncertainty attached to an event such as investment where there is some amount of risk associated to it as there can be either gain or loss.

The standard deviation measures the volatility of the stock. It measures in absolute terms the dispersion of asset risk around its mean.

c)

Summary Introduction

To determine: The expected return of portfolio.

Introduction:

In financial context, return is seen as percentage that represents the profit in an investment.

Portfolio refers to a set of financial investments such as debentures, stocks, bonds and mutual funds owned by the investor.

d)

Summary Introduction

To discuss: The correlation characteristics.

e)

Summary Introduction

To discuss: The standard deviation of portfolios.

f)

Summary Introduction

To discuss: The portfolio preference.