Finance professor right, You are currently only invested in

Finance professor right

Reference no: EM1348667

You are currently only invested in the Natasha Fund (aside from risk-free securities).It has an expected return of 14% with a volatility of 20%. Currently, the risk-free rate of interest is 3.8%. Your broker suggests that you add Hannah Corporation to your portfolio. Hannah Corporation has an expected return of 20%, a volatility of 60%, and a correlation of 0 with the Natasha Fund.
a) Is your broker right?
b) You follow your broker's advice and make a substantial investment in Hannah stock so that, considering only your risky investment, 60% is in the Natasha Fund and 40% is in Hannah stock. When you tell your finance professor about your investment, he says that you made a mistake and should reduce your investment in Hannah. Is your finance professor right?
c) You decide to follow your finance professor's advice, and reduce your exposure to Hannah. Now Hannah represents 15% of your risky portfolio, with the rest in the Natasha Fund. Is this the correct amount of Hannah stock to hold?

Reference no: EM1348667

Questions Cloud

Explain what marketing channels are in regards direct sales : I want to say in four paragraphs that explain what marketing channels are in regards to (1) direct sales, social media, where I sell directly on the Internet or through advertising directed to the consumer

Calculate the transmitted intensity : Three polarizing plates whose planes are parallel are centered on a common axis. The directions of the transmission axes relative to common vertical direction.

Illustrate what are the major factors that have affected us : Illustrate what are the major factors that have affected U.S. household consumption since the recession in 2001.

To reverse the order of elements on a stack : Write a program in C++ to reverse the order of elements on a stack S using two additional stacks using one additional stack

Finance professor right : You are currently only invested in the Natasha Fund (aside from risk-free securities). It has an expected return of 14 percent with a volatility of 20 percent. Currently, the risk-free rate of interest is 3.8 percent.

Life insurance policy and irrevocable trust : Last year Robert transferred a life insurance policy worth $45,000 to an irrevocable trust with directions to distribute the corpus of the trust to his grandson,

Determing production and direct material purchases : Alder Company budgets an annual basis. The following beginning and ending inventory levels (in units) are planned for the next year. Two units of raw material are required to produce each of finished products.

Role of trust and tacitness : What are the implications of the findings in this article for how innovation results? Any real-life examples?

How far will a point on the edge of the wheel : A long, straight wire has a 13.7 A current flowing in the positive x-direction. Close to wire is a square loop of copper wire that carries a 2.17 A current in direction shown. The near side of the loop is d = 46.3 cm away from the wire.

User Account

All Pages