Question
In: Statistics and Probability
Alex has two funds A and B. The annual return of fund A is denoted by...
Alex has two funds A and B. The annual return of fund A is denoted by X (in %) while the annual return of fund B is denoted by Y (in %) . Assume X ∼ U (−10, 20) and Y ∼ N (10, 50). Further, suppose the probability that both stocks A and B have positive annual returns is 0.6.
-
Find the probability that stock A has a negative return.
-
Find the probability that stock B has a positive return.
-
Find the probability that stock B has a positive return but stock A has a negative return.
-
Find the probability that stock A has a negative return, given that stock B has a positive return.
-
Find the probability that both stocks A and B have negative returns.
I would appreciate if the expert can write down some explanations for the more complicated steps so that I can understand how they derive that step. Thanks!
Solutions
orchestra answered 2 years agoRelated Solutions
1. Compare the performance of the two equity funds (Fund A and Fund B), based on...
1. Compare the performance of the two equity funds (Fund A and
Fund B), based on the information given below.
Fund
Average Return (%)
Standard deviation of returns (%)
Beta
A
B
19.5
15.7
15.5
9.5
1.5
1.2
Additional information:
The risk-free rate is 5% and the return on the market index is
12%. The tracking error is 8.5% for Fund A, and 4% for Fund
B. Evaluate and discuss.
PLEASE SHOW ALL WORING AND FORMULA USED TO ANSWER THIS...
1. Compare the performance of the two equity funds (Fund A and Fund B), based on...
1. Compare the performance of the two equity funds (Fund A and
Fund B), based on the information given below.
Fund
Average Return (%)
Standard deviation of returns (%)
Beta
A
B
19.5
15.7
15.5
9.5
1.5
1.2
Additional information:
The risk-free rate is 5% and the return on the market index is
12%. The tracking error is 8.5% for Fund A, and 4% for Fund
B. Evaluate and discuss.
2. Jason and Mary purchase a house for $550,000. They...
Suppose a fund has a portfolio with two risky assets; stock and bond. Annual expected return...
Suppose a fund has a portfolio with two risky assets; stock and
bond. Annual expected return of stock is 0.15 and standard
deviation of 0.10 and expected return of bond is 0.08 and standard
deviation of 0.07. The correlation-coefficient between stock and
bond is 0.2. while t-bill has annual return of 0.03
Draw the opportunity set with 25% increment in bond fund. Also
indicate the variance minimizing weight for bond and stock
Draw the optimal CAL line and calculate the...
The following tables shows 5 year returns of different funds Mutual Fund Annual Return (%) Year...
The following tables shows 5 year returns of different funds
Mutual Fund
Annual Return (%)
Year 1
Year 2
Year 3
Year 4
Year 5
Stocks
12.01
11.22
13.47
45.42
-21.93
Bonds
17.64
4.25
7.51
-1.33
7.36
Aggressive Growth
32.41
18.71
30.09
41.46
-23.26
Aggressive Value
32.36
20.61
12.93
7.06
-5.37
Moderate Growth
33.44
19.40
6.77
58.68
-9.02
Moderate Value
24.56
25.32
-6.70
5.43
17.31
Let’s assume the minimum return every year across all the funds
is M. This means...
1. Compare the performance of the two equity funds (Fund A and Fund B), based on the information given below.
1. Compare the performance of the two equity funds (Fund A and Fund B), based on the information given below.
Fund
Average Return (%)
Standard deviation of returns (%)
Beta
A
B
19.5
15.7
15.5
9.5
1.5
1.2
Additional information:
The risk-free rate is 5% and the return on the market index is 12%. The tracking error is 8.5% for Fund A, and 4% for Fund B. Evaluate and discuss.
You are considering the risk-return profile of two mutual funds for investment. The relatively risky fund...
You are considering the risk-return profile of two mutual funds
for investment. The relatively risky fund promises an expected
return of 13% with a standard deviation of 17.9%. The relatively
less risky fund promises an expected return and standard deviation
of 3.3% and 5.4%, respectively. Assume that the returns are
approximately normally distributed. [You may find it useful
to reference the z table.]
a-1. Calculate the probability of earning a
negative return for each fund. (Round "z" value to
2...
You are considering the risk-return profile of two mutual funds for investment. The relatively risky fund...
You are considering the risk-return profile of two mutual funds
for investment. The relatively risky fund promises an expected
return of 13.7% with a standard deviation of 19.3%. The relatively
less risky fund promises an expected return and standard deviation
of 3.3% and 6.6%, respectively. Assume that the returns are
approximately normally distributed. a-1. Calculate the probability
of earning a negative return for each fund. (Round final answer to
4 decimal places.) Probability Riskier fund Less risky fund a-2.
Which...
You are considering the risk-return profile of two mutual funds for investment. The relatively risky fund...
You are considering the risk-return profile of two mutual funds
for investment. The relatively risky fund promises an expected
return of 11.7% with a standard deviation of 20.1%. The relatively
less risky fund promises an expected return and standard deviation
of 4.2% and 6.2%, respectively. Assume that the returns are
approximately normally distributed. [You may find it useful
to reference the z table.]
a-1. Calculate the probability of earning a
negative return for each fund. (Round "z" value to
2...
You are considering the risk-return of two mutual funds for investment. The relatively risky fund promises...
You are considering the risk-return of two mutual funds for
investment. The relatively risky fund promises an expected return
of 14.7% with a standard of 15.6%. The relatively less risky fund
promises an expected return and standard deviation of 6.4% and
3.8%, respectively. Assume that the returns are approximately
normally distributed. Using normal probability calculations and
complete sentences, give your assessment of the likelihood of
getting, on one hand, a negative return and on the other, a return
above 10%...
You are considering the risk-return profile of two mutual funds for investment. The relatively risky fund...
You are considering the risk-return profile of two mutual funds
for investment. The relatively risky fund promises an expected
return of 7.2% with a standard deviation of 15.7%. The relatively
less risky fund promises an expected return and standard deviation
of 3.9% and 6%, respectively. Assume that the returns are
approximately normally distributed.
a-1. Calculate the probability of earning a negative return for
each fund. (Round final answer to 4 decimal places.)Probability:
Riskier fund and Less risky fund
a-2. Which...
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