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An investor holds a porfolio of stocks and is considering investing in the DBB Company. The firm's prospects look neutral and you estimate the following probability distribution of possible returns.
Returns on DVI P Returns on DBB
-5% 0.10 -40%
3% 0.20 -10%
8% 0.40 20%
10% 0.20 32%
12% 0.10 45%
A) How much is the expected return for DBB?
B) How much is the coefficient of variation for DBB?
C) 99.73% of the time in what range (what specific values) would you expect the returns for DBB? Use the empirical rule?
D) Add DVI to your portfolo, You sell 30% of DBB to purchase DVI. How much is the expected return for this portfolio?
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