You have been given the following return data, investment alternatives: a. Calculate the average portfolio return for each of the three alternatives b. Calculate the standard deviation of returns for each of the three alternatives. c. On the basis of your findings in parts a and b, which of the three investment alternatives would you recommend? Why? on three assets A, B, and C-over the period 2021-2024. Using these assets, you have isolated three ( a. Calculate the portfolio return over the 4-year period for each of the 3 alternatives. Alternative 1: 7.00% (Round to two decimal places.) Alternative 2: 7.00% (Round to two decimal places) Alternative 3: 7.00% (Round to two decimal places) b. Calculate the standard deviation of returns over the 4-year period for each of the 3 alternatives Alternative 1: % (Round to three decimal places)

You have been given the following return data, investment alternatives: a. Calculate the average portfolio return for each of the three alternatives b. Calculate the standard deviation of returns for each of the three alternatives. c. On the basis of your findings in parts a and b, which of the three investment alternatives would you recommend? Why? on three assets A, B, and C-over the period 2021-2024. Using these assets, you have isolated three ( a. Calculate the portfolio return over the 4-year period for each of the 3 alternatives. Alternative 1: 7.00% (Round to two decimal places.) Alternative 2: 7.00% (Round to two decimal places) Alternative 3: 7.00% (Round to two decimal places) b. Calculate the standard deviation of returns over the 4-year period for each of the 3 alternatives Alternative 1: % (Round to three 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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The historical returns for two investments-A and B-are summarized in the following table for the period 2016 to 2020, Use the data to answer the questions that follow. a. On the basis of a review of the return data, which investment appears to be more risky? Why? b. Calculate the standard deviation for each investment's returns. c. On the basis of your calculations in part b, which investment is more risky? Compare this conclusion to your observation in part a acce a. On the basis of a review of the return data, which investment appears to be more risky? Why? (Choose the best answer below.) OA. The riskier investment appears to be investment B, with returns that vary widely from the average relative to investment A, whose returns show less deviation from the average. B. The riskier investment appears to be investment A, with returns that vary widely from the average relative to investment B, whose returns show less deviation from the average. C. Investment A and investment B have equal…
Suppose you are considering investing your entire portfolio in three assets A, B and C. You expect that after you invest, four possible mutually exclusive scenarios will occur, with associated returns (in %) for each of the three assets as listed below. The probability of each scenario is given below (Attached image). Find the expected returns and standard deviations of Asset A, B & C. (HINT: the expected return is given by the probability-weighted sum of returns in each scenario. The expected standard deviation is given by the square root of the probability-weighted sum of squared deviations from the expected return.) Is there any reason to invest in Asset A given its low expected return and high standard deviation?
Alternative 1 2 WN 3 Investment 100% of asset F 50% of asset F and 50% of asset G 50% of asset F and 50% of asset H Year 2019 2020 2021 2022 Asset F 10% 11% 12% 13% Historical Return Asset G 11% 10% 9% 8% Asset H 8% 9% 10% 11%
Portfolio analysis You have been given the expected return data shown in the first table on three assets - F, G, and H- over the period 2019-2022: . Using these assets, you have isolated the three investment alternatives shown in the following table: . a. Calculate the average return over the 4-year period for each of the three altenatives. b. Calculate the standard deviation of returns over the 4-year period for each of the three alternatives. c. Use your findings in parts a and b to calculate the coefficient of variation for each of the three alternatives. d. On the basis of your findings, which of the three investment alternatives do you think performed better over this period? Why? a. The expected return over the 4-year period for alternative 1 is %. (Round to two decimal place.) The expected return over the 4-year period for alternative 2 is %. (Round to two decimal place.) The expected return over the 4-year period for alternative 3 is %. (Round to two decimal place.) b. The…
You have been asked for your advice in selecting a portfolio of assets and have been supplied with the following data:. You have been told that you can create two portfolios-one consisting of assets A and B and the other consisting of assets A and C-by investing equal proportions (50%) in each of the two component assets. a. What is the average expected return, r, for each asset over the 3-year period? b. What is the standard deviation, s, for each asset's expected return? c. What is the average expected return, rp, for each of the portfolios? d. How would you characterize the correlations of returns of the two assets making up each of the portfolios identified in part c? e. What is the standard deviation of expected returns, Sp, for each portfolio? f. What would happen if you constructed a portfolio consisting of assets A, B, and C, equally weighted? Would this reduce risk or enhance return?
Darren is considering the following investments; Alphabet, PayZero and FNQ Res.: Probability of return (%) Likely Return Alphabet (%) Likely Return PayZero (%) Likely Return FNQ Res. (%) 20 6 4 9 30 9 7 14 40 16 10 19 10 18 14 26 a) Calculate the expected return for each asset.b) Calculate the expected return on a portfolio comprising each asset weighted as follows Asset Weighting (%) Weighting (%) Alphabet 20 PayZero 55 FNQ Res. 25 c) Explain to Darren the benefit of combining the assets into a portfolio instead of undertaking individual investments in Alphabet, PayZero and FNQ Res. d) Calculate the risk attached to each of the investments proposed in Alphabet, PayZero and FNQ Res. Rank each investment in regard to its risk and return. Discuss the likely range of returns that could eventuate for each asset with a 95% level of accuracy. ONLY ANSWER PART C AND D PLEASE
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Ahsan, an individual investor, is evaluating the investment opportunity. To evaluate this investment, he collected the relevant data and has estimated the following result and their likelihood (probability). There are three possible results and each of them will generate a different return. Outcome Probability Rate of Return A 30% 50% B. 50% 30% 20% 70% a. Calculate the expected rate of return for the investor. b. What is the importance/relevance of expected rate of return? Answer:
Suppose the average return on Asset A is 6.6 percent and the standard deviation is 8.6 percent and the average return and standard deviation on Asset B are 3.8 percent and 3.2 percent, respectively. Further assume that the returns are normally distributed. Use the NORMDIST function in Excel® to answer the following questions. a. What is the probability that in any given year, the return on Asset A will be greater than 11 percent? Less than 0 percent? (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) b. What is the probability that in any given year, the return on Asset B will be greater than 11 percent? Less than 0 percent? (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) c-1. In a particular year, the return on Asset A was −4.25 percent. How likely is it that such a low return will recur at some point in the future? (Do…
Compute the residual risk measure for portfolio A. Round off your final answer to three digits after the decimal point. Compute the appraisal ratio for portfolio B. Round off your final answer to three digits after the decimal point.
Consider a portfolio with two assets and three states of nature at the end of the year. Would it be possible to create a portfolio that is risk-free under these circumstances?
Suppose that, for a certain potential investment project, the optimistic, most likely, and pessimistic estimates are as shown in the accompanying table. Solve, a. What is the AW for each of the three estimation conditions? b. It is thought that the most critical factors are useful life and net annual cash flow. Develop a table showing the net AW for all combinations of the estimates forthese two factors, assuming all other factors to be at their most likely values.

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