Question
In: Finance
Suppose you are giving the outcome returns of some assets under different scenarios. The probability for...
Suppose you are giving the outcome returns of some assets under different scenarios. The probability for the bearish, neutral and bullish market is 20%, 50% and 30%.
| Asset |
Bearish Market |
Neutral | Bullish Market |
| A | -4.0% | 0.0% | 8.0% |
| B | 8.0% | 3.0% | -7.0% |
| C | -13.0% | -2.0% | 20.0% |
| D | 6.0% | 2.0% | -1.0% |
| E | 20.0% | 10.0% | 10.0% |
| Risk free Asset | 0.5% | 0.5% | 0.5% |
Please answer the following questions
Q1(1 point) What are the correlations between A and all other assets?
Q2 (1 point) How do you form MVP from asset A and B only (find the weights)?
Q3(1 point) What is the equation representing the efficient frontier for the above case in Q2?
Q4(1 point) How do you form the MVP based on asset A and C only, assuming short selling is allowed?
Q5(1 point) What is the equation representing the EF for the Q4 case?
Q6(1 point) What is the optimal RISKY market portfolio if asset A and D are the only two risky assets?
Q7(2 points) What is the optimal portfolio for an risk averse investor with A=200 is there are only asset A and D and risk free asset?
Q8(2 points) Assume the market portfolio has std of 3%, and the beta of asset A is 0.6, to what extend the expected return of asset A can be explained by singleindex model using the given market portfolio as the market index, and how much is the unsystematic risk based on this single-index model ?
Solutions
jeff jeffy answered 3 weeks agoRelated Solutions
Consider the two assets A and B for which returns (%) under different conditions of economy...
Consider the two assets A and B for which returns (%) under
different conditions of economy are given as below.
Returns (%)
State of the Economy
Probability
Stock A
Stock B
Recession
0.1
-16
-12
Above Average
0.2
-3
4
Average
0.4
14
10
Below Average
0.2
28
15
Boom
0.1
35
20
Find the expected return of each asset
Find the risk (as measured by standard deviation of return) of
each asset
If an investor decides to invest $8,000...
Consider the two assets A and B for which returns (%) under different conditions of economy...
Consider the two assets A and B for which returns (%) under
different conditions of economy are given as below.
Returns (%)
State of the Economy
Probability
Stock A
Stock B
Recession
0.1
-16
-12
Above Average
0.2
-3
4
Average
0.4
14
10
Below Average
0.2
28
15
Boom
0.1
35
20
Find the expected return of each asset
Find the risk (as measured by standard deviation of return) of
each asset
If an investor decides to invest $8,000...
Consider the two assets A and B for which returns (%) under different conditions of economy...
Consider the two assets A and B for which returns (%)
under different conditions of economy are given as
below.
Returns (%)
State of the Economy
Probability
Stock A
Stock B
Recession
0.1
-16
-12
Above Average
0.2
-3
4
Average
0.4
14
10
Below Average
0.2
28
15
Boom
0.1
35
20
Find the expected return of each asset
Find the risk (as measured by standard deviation of
return) of each asset
If an investor decides to invest $8,000...
Question 1 Consider the two assets A and B for which returns (%) under different conditions...
Question 1
Consider the two assets A and B for which returns (%) under
different conditions of economy are given as below.
Returns (%)
State of the Economy
Probability
Stock A
Stock B
Recession
0.1
-18
-10
Above Average
0.2
-4
2
Average
0.4
12
8
Below Average
0.2
24
12
Boom
0.1
30
18
Find the expected return of each asset
Find the risk (as measured by standard deviation of return) of
each asset
If an investor decides to...
As investor, you need to compare the returns and the risks associated with two different Assets...
As investor, you need to compare the returns and the risks
associated with two different Assets
(stocks, cryptocurrencies or commodities).
The data are given in an excel file format called Project Dataset #
file, posted on your BB.
Group #1: OOREDOO and Vodafone
2. Use descriptive statistics to summarize the data. (Numerical and
Graphical).
3. Extract a sample of 100 observations from each series (the
selected sample will be used in
the part of inferential statistics).
4. Show how you...
Consider three scenarios with the probabilities given below. Let the returns on two different stocks in...
Consider three scenarios with the probabilities given below. Let
the returns on two different stocks in these scenarios be as
follows: Scenario Probability return K1 return K2 ω1 0.2 −10% −30%
ω2 0.5 0% 20% ω3 0.3 10% 50% If a portfolio has 60% of funds
invested in stock 1 and 40% of funds invested in stock 2, find the
risk σV for this portfolio. (Need explanation not just
spreadsheet)
Consider the following scenarios for Space Corp.’s likely equity returns per year: Scenario Probability &
Consider the following scenarios for Space Corp.’s likely
equity returns per year:
Scenario Probability Expected
Returns
Really Bad
15% (5%)
Bad
20% 2.5%
Likely
30% 7.5%
Better
20% 12.5%
Really Good
15% 20%
What is the expected return for this
security per year?
What is the standard deviation of
expected returns?
What are the expected returns with a
90% confident interval, if this follows the normal
distribution?
Describe different categories of investments in financial assets and list the accounts used by giving examples.(...
Describe different categories of investments in financial assets
and list the accounts used by giving examples.( at most 4 pages
allowed)
1. What are some scenarios under which you would come out ahead with the 7/1 ARM?...
1. What are some scenarios under which you would come out ahead
with the 7/1 ARM? Think carefully about interest rate
trajectories.
1. What are some scenarios under which you would come out behind
with the 7/1 ARM? Again, think carefully about the interest
rates.
What are the average returns of some U.S. assets and their historic risks? What is the...
What are the average returns of some U.S. assets and their
historic risks?
What is the Beta coefficient and how can be measured?
What is the CAPM and the least risky security you can think
of?
What is the risk of a portfolio and how can be minimized?
Why can’t a firm finance with only the lowest-cost type of
capital?
Suppose interest rates in the economy increase. How would such a
change affect the costs of both debt and common...
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- Critical thinking is ?
- Identify key areas on how the understanding of abnormal behavior has evolved throughout history.
- Present the theories of classical and operant conditioning in two strong paragraphs. Assume that your reader...
- Problem 26.49: Resolution of the eye, I. Even if the lenses of our eyes functioned perfectly,...
- A hexagonal close-packed cell is known to contain two atoms of the same type located at...
- typing one page about international equity and bond market.
- a block of mass 2.4 kg is sitting on a frictionless ramp with a spring at...
ADVERTISEMENT