You decide to invest in a portfolio consisting of 21 percent Stock X, 48 percent Stock Y, and the remainder in Stock Z. Based on the following information, what is the standard deviation of your portfolio? State of Economy Normal Boom Probability of State of Economy .84 .16 Return if Stat Stock X Stock Y 10.20% 3.60% 17.50% 25.50%

You decide to invest in a portfolio consisting of 21 percent Stock X, 48 percent Stock Y, and the remainder in Stock Z. Based on the following information, what is the standard deviation of your portfolio? State of Economy Normal Boom Probability of State of Economy .84 .16 Return if Stat Stock X Stock Y 10.20% 3.60% 17.50% 25.50%

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter2: Fundamental Economic Concepts

Section: Chapter Questions

Problem 6E

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53. The annual demand for Prizdol, a prescription drugmanufactured and marketed by the NuFeel Company,is normally distributed with mean 50,000 and standarddeviation 12,000. Assume that demand during each ofthe next 10 years is an independent random numberfrom this distribution. NuFeel needs to determine howlarge a Prizdol plant to build to maximize its expectedprofit over the next 10 years. If the company builds aplant that can produce x units of Prizdol per year, it willcost $16 for each of these x units. NuFeel will produceonly the amount demanded each year, and each unit ofPrizdol produced will sell for $3.70. Each unit of Prizdol produced incurs a variable production cost of $0.20.It costs $0.40 per year to operate a unit of capacity.a. Among the capacity levels of 30,000, 35,000,40,000, 45,000, 50,000, 55,000, and 60,000 unitsper year, which level maximizes expected profit?Use simulation to answer this question.b. Using the capacity from your answer to part a,NuFeel can be 95%…
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