User Account

All Pages

Calculate the expected return and standard deviation

Assignment Help Finance Basics
Reference no: EM131402099

You have estimated the returns of 2 companies for the next year depending on the general economic condition.

Outcome

Probability

Company 1

Company 2

Boom

30%

15%

5%

Normal

50%

5%

0

Recession

20%

0%

10%

(a) Calculate the expected return and standard deviation of the returns of each company.

(b) Calculate the covariance and correlation between the returns of these 2 companies.

(c) Let's combine these 2 companies 50%-50% in portfolio P. Calculate the expected return and the standard deviation of the portfolio P.

(d) Using mean-variance criterion, does any of the 3 investments, company 1, company 2, and portfolio P, dominate the other one?

Reference no: EM131402099

Questions Cloud

Expected return and standard deviation of a portfolio : (a) What is the expected return and standard deviation of a portfolio that is completely invested in the risk-free asset? (b) What is the expected return and standard deviation of a portfolio that has 50% of its wealth in the risk-free asset and 50..
How is linked to specific organelles within eukaryotic cell : How is each linked to specific organelles within the eukaryotic cell. What has been the importance and significance of these processes and their cyclic interaction to the evolution and diversity of life?
What kind of deal did the soccer player snag : Assuming all the payments, except the first $2 million are paid at the end of each year and the discount rate is 9%, what kind of deal did the soccer player snag?
How would you validate the diagnosis of fibromyalgia : MP is a sixty-five-year-old male who has recently retired. He is coming in today for a complaint about pain in his back, knees, and hips. He reports that he has been experiencing this pain for the past six months, and he has been able to control t..
Calculate the expected return and standard deviation : (a) Calculate the expected return and standard deviation of the returns of each company. (b) Calculate the covariance and correlation between the returns of these 2 companies.
What do you see as the pros of government safety regulation : What do you see as the pros and cons of government safety regulation? Is advertising a positive or socially desirable aspect of our economic system?
Default risk premium : A Treasury bond that matures in 10 years has a yield of 4%. A 10-year corporate bond has a yield of 9%. Assume that the liquidity premium on the corporate bond is 0.55%. What is the default risk premium on the corporate bond? Round your answer to ..
Calculate the yield using a geometric average : If the pure expectations theory is correct, what does the market believe that 2-year securities will be yielding 4 years from now? Calculate the yield using a geometric average. Do not round your intermediate calculations. Round your answer to two..
Equipment purchases will need to be funded : You currently have $13,820 in an investment account, with plans to liquidate the account during a period when equipment purchases will need to be funded during the off-season.

Reviews

Write a Review

Finance Basics Questions & Answers

  Carondelet hospital is evaluating a lease arrangement for

carondelet hospital is evaluating a lease arrangement for its ambulance fleet. the total value of the lease is 420000.

  What are the three principal forms of business organization

What are the three principal forms of business organization? What are the advantages and disadvantages of each?

  An investor is long a short-term at-the-money put option on

an investor is long a short-term at-the-money put option on an underlying portfolio of equities with a notional value

  Choose an organization delivering goods andor services

choose an organization delivering goods andor services globally. provide a background of the organization and fully

  Two different countries and access their most recent annual

Make a PPT. You are required to choose two multinational companies based in two different countries and access their most recent annual reports. Choose companies that place copies of their annual reports on their website. The annual reports are norma..

  Calculate kidds exchange gain or loss if kidd receives

using the same data in problema calculate kidds exchange gain or loss if kidd receives payment from the british

  The markets required return suddenly rises to 7 what are

you have gathered the following data on three

  Prepare for her financial needs after her retirement

Prepare for her financial needs after her retirement?

  Financial analysis draft of apple inc

Financial Analysis Draft of Apple Inc? Draft your financial analysis report of your selected company, including the following sixsections:? Executive summary? Company/industry description? Findings? Assumptions? Crucial factors? Conclusion

  Compute the selling price of bonds

The LOGOS Company is planning on issuing bonds that pay no interest but can be converted into $1,000 at maturity, seven years from their purchase.

  Estimate the value of each division

Estimate Weston’s current equity beta and cost of capital. Is this cost of capital useful for valuing Weston’s projects? How is Weston’s equity beta likely to change over time?

  Suppose an investment analyst takes a random sample of us

a) Suppose an investment analyst takes a random sample of U.S equity mutual funds and calculates Sharp Ratio. The sample size is 100, and the average sharp ratio is 0.45. The sample has a standard deviation of 0.30. Calculate and interpret the 90 per..

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd