Benefits of diversification. Sally Rogers has decided to invest her wealth equally across the following three assets: a. What are her expected returns and the risk from her investment in the three assets? How do they compare with investing in asset M alone? Hint: Find the standard deviations of asset M and of the portfolio equally invested in assets M, N, and O. b. Could Sally reduce her total risk even more by using assets M and N only, assets M and O only, or assets N and O only? Use a 50/50 split between the asset pairs, and find the standard deviation of each asset pair. HID a. What is the expected return of investing equally in all three assets M, N, and O? % (Round to two decimal places.)

Benefits of diversification. Sally Rogers has decided to invest her wealth equally across the following three assets: a. What are her expected returns and the risk from her investment in the three assets? How do they compare with investing in asset M alone? Hint: Find the standard deviations of asset M and of the portfolio equally invested in assets M, N, and O. b. Could Sally reduce her total risk even more by using assets M and N only, assets M and O only, or assets N and O only? Use a 50/50 split between the asset pairs, and find the standard deviation of each asset pair. HID a. What is the expected return of investing equally in all three assets M, N, and O? % (Round to two decimal places.)

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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Benefits of diversification. Sally Rogers has decided to invest her wealth equally across the following three assets: a. What are her expected returns and the risk from her investment in the three assets? How do they compare with investing in asset M alone? Hint: Find the standard deviations of asset M and of the portfolio equally invested in assets M, N, and O. b. Could Sally reduce her total risk even more by using assets M and N only, assets M and O only, or assets N and O only? Use a 50/50 split between the asset pairs, and find the standard deviation of each asset pair. a. What is the expected return of investing equally in all three assets M, N, and O? % (Round to two decimal places.) Data table (Click on the following icon in order to copy its contents into a spreadsheet.) Asset M Retur States Boom 11% 8% Normal Recession - 1% Probability 32% 49% 19% Print Asset N Return 22% 13% 2% Done Asset O Retum - 1% 8% 11% - X
Question Help diversification. Sally Rogers has decided to invest her wealth equally across the following three assets: E What are her expected returns and the risk from her investment in the three assets? How do they comp ng in asset M alone? Hint Find the standard deviations of asset M and of the portfolio equally invested in assets M, N, and O. expected return of investing equally in all three assets M. N. and O? und to two decimal places.) Data Table - X (Click on the following icon O in order to copy its contents into a spreadsheet.) States Probabilily Asset M Roturn Asset N Return Asset O Return Boom 30% 12% 21% 0% 9% Normal 46% 9% 14% Recession 24% 0% 1% 12% Print Done
Benefits of diversification. Sally Rogers has decided to invest her wealth equally across the following three assets: E. What are her expected returns and the risk from her investment in the three assets? How do they compare with investing in asset M alone? Hint: Find the standard deviations of asset M and of the portfolio equally invested in assets M, N, and O. What is the expected return of investing equally in all three assets M, N, and O? % (Round to two decimal places.)
a. What are her expected returns and the risk from her investment in the three assets? How do they compare with investing in asset M alone? Hint: Find the standard deviations of asset M and of the portfolio equally invested in assets M, N, and O. b. Could Sally reduce her total risk even more by using assets M and N only, assets M and O only, or assets N and O only? Use a 50/50 split between the asset pairs, and find the standard deviation of each asset pair. Data table (Click on the following icon in order to copy its contents into a spreadsheet.) States Probability Asset M Return Boom 27% 12% Normal 53% 9% Recession 20% 0% Asset N Return 22% Asset O Return 0% 14% 9% 2% 12%
If Justine Bieber have P1,000,000.00 and he needs to create an investment portfolio, what are the assets that he might to considerate or intend to invest upon? Have an estimate proportion. Why Justine Bieber choosing those assets? Explain briefly and intelligently.
Benefits of diversification. Sally Rogers has decided to invest her wealth equally across the following three assets: . What are her expected returns and the risk from her investment in the three assets? How do th with investing in asset M alone? Hint Find the standard deviations of asset M and of the portfolio equally invested insets M, N, and O. What is the expected return of investing equally in all three assets M, N, and O? |% (Round to two decimal places.) i %3D Data Table (Click on the following icon in order to copy its contents into a spreadsheet.) States Probability Asset M Return Asset N Return Asset O Return Boom 32% 13% 22% 5% Normal 53% 11% 15% 11% Recession 15% 5% 2% 13% Print Done
There are many ways to invest money. Jaleel wonders what are the investment options he can choose from. Choose three asset classes from the list below and help Jaleel to have a closer look at each of them. You are expected to explain the unique characteristics of the asset class, their associated risks and potential returns. For each asset class, you should use one or two examples to support your explanation. Asset Class Characteristics Risk Potential Returns Example Cash Products Fixed Income Equities Currencies Derivatives
Benefits of diversification. What is the expected return of investing equally in all three assets M, N, and O? Find the standard deviations of asset M and of the portfolio equally invested in assets M, N, and O.
Facing the question of whether to buy and hold an asset or whether to buy one asset rather than another, which of the following factors must be considered by an individual investor? A Investor's wealth. B Expected return on one asset relative to alternative assets. C Risk of one asset relative to alternative assets. D All of the above must be considered. Which of the following is correct about the expected return on a particular asset? Question 6 options: A If the asset's beta is 1.0, then the expected return on that asset is equal to the risk-free rate of return. B If the asset's beta is zero, then the expected return on that asset is greater than the risk-free rate of return. C If the asset's beta is zero, then the expected return on that asset is equal to the risk-free rate of return. D If the asset's beta is greater than 1.0, then the…
The expected value of an investment: Answer a. Is what the owner will receive when the investment is sold b. Is the sum of the payoffs c. Is the probability-weighted sum of the possible outcomes d. Cannot be determined in advance
Remember, the expected value of a probability distribution is a statistical measure of the average (mean) value expected to occur during all possible circumstances. To compute an asset's expected return under a range of possible circumstances (or states of nature), multiply the anticipated return expected to result during each state of nature by its probability of occurrence. Consider the following case: Ethan owns a two-stock portfolio that invests in Falcon Freight Company (FF) and Pheasant Pharmaceuticals (PP). Three-quarters of Ethan's portfolio value consists of FF's shares, and the balance consists of PP's shares. Each stock's expected return for the next year will depend on forecasted market conditions. The expected returns from the stocks in different market conditions are detailed in the following table: Market Condition Strong Normal Probability of Occurrence 0.50 0.25 Falcon Freight Pheasant Pharmaceuticals 27.5% 38.5% 16.5% 22% Weak 0.25 -22% -27.5% Calculate expected…
2. Statistical measures of stand-alone risk Remember, the expected value of a probability distribution is a statistical measure of the average (mean) value expected to occur during all possible circumstances. To compute an asset’s expected return under a range of possible circumstances (or states of nature), multiply the anticipated return expected to result during each state of nature by its probability of occurrence. Consider the following case: David owns a two-stock portfolio that invests in Happy Dog Soap Company (HDS) and Black Sheep Broadcasting (BSB). Three-quarters of David’s portfolio value consists of HDS’s shares, and the balance consists of BSB’s shares. Each stock’s expected return for the next year will depend on forecasted market conditions. The expected returns from the stocks in different market conditions are detailed in the following table: Market Condition Probability of Occurrence Happy Dog Soap Black Sheep Broadcasting Strong 0.50 42.5% 59.5%…

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