Suppose there are two one-year assets. You cannot buy a fractional portion of either asset. Asset...

Suppose there are two one-year assets. You cannot buy a fractional portion of either asset. Asset A costs $100 to buy and in one year pays a total of either $120 or $90, with equal probability. Asset B costs $200 to buy and in one year pays a total of either $180 or $240. When Asset A pays $120, Asset B pays $180 (and when Asset A pays $90, asset B Pays $240). You buy two of Asset A and one of asset B. What is the standard deviation of the rate of return on your investment? (Hint: define a new asset C = 2A +B). Express your answer in decimal form without a percent sign and rounded and accurate to 4 decimal place.

Expert Solution

Please refer to below spreadsheet for calculation and answer. Cell reference also provided.

Cell reference -

Hope this will help, please do comment if you need any further explanation. Your feedback would be appreciated.

jeff jeffy answered 6 months ago

Suppose there are two one-year assets. You cannot buy a fractional portion of either asset. Asset...

Suppose there are two one-year assets. You cannot buy a fractional portion of either asset. Asset A costs $100 to buy and in one year pays a total of either $120 or $90, with equal probability. Asset B costs $200 to buy and in one year pays a total of either $180 or $240. When Asset A pays $120, Asset B pays $180 (and when Asset A pays $90, asset B Pays $240). You buy two of Asset A and...

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Suppose there are two one-year assets. You cannot buy a fractional portion of either asset. Asset...

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