Question

In: Finance

Use the information in the table State Probabilty Ret(US) Ret(UK) Ret(Brazil) 1 .30 .10 .14 .06...

Use the information in the table

State	Probabilty	Ret(US)	Ret(UK)	Ret(Brazil)
1	.30	.10	.14	.06
2	.30	.08	.07	.20
3	.40	.14	.11	.06

What is the expected return of a portfolio with 25% of wealth invested in the US, and 75% invested in the UK?
What is the standard deviation of return of a portfolio with 25% of wealth invested in the US, and 75% invested in the UK?
What is the covariance of return between the US and the UK?
Can an investor obtain diversification gains by investing in both the US and the UK? Why or why not? Be sure to provide quantitative justification for your answer.

Expert Solution

a. Expected Return from US= 0.3*10%+0.3*8%+0.4*14%=11%

Expected return from UK=0.3*14%+0.3*7%+0.4*11%=10.7%

Hence, expected return of a portfolio with 25% wealth invested in the US and 75% invested in the UK=25%*11%+75%*10.7%=10.775%

b.

Hence, standard deviation of the portfolio is 3.02%

c.

Hence, covariance is 0.000433

d.

We can see that standard deviation for US and UK is 3.06% and 3.51% but the standard deviation of their portfolio is 3.02% which is less than the individual 2 security.

Hence, diversification or less risk can be obtained by investing in both the US and UK.

jeff jeffy answered 7 months ago

Question 1 Topic: Beef Production in the US and Brazil The US and Brazil both produce...

Question 1 Topic: Beef Production in the US and Brazil The US and Brazil both produce beef domestically, and the beef industries in the respective countries may have negative externalities associated with beef production. . List two major negative externalities associated with beef production in the US. List which group or groups in society (can be domestic, international or both) are affected by the externalities and explain the impact 2. List two major negative externalities associated with beef production in...

Use the following table to answer questions 1 - 6: State of Economy Probability of State...

Use the following table to answer questions 1 - 6: State of Economy Probability of State of Economy Asset A Rate of Return Asset B Rate of Return Boom 0.3 0.13 0.08 Normal 0.5 0.06 0.05 Recession 0.2 -0.05 -0.01 What is the expected return for asset A? What is the expected return for asset B? What is the standard deviation for asset A? What is the standard deviation for asset B? What is the expected return of a portfolio...

Use the following information for Problems 10-14: A company produces and sells a product with a monthly...

Use the following information for Problems 10-14: A company produces and sells a product with a monthly demand estimated to be Q = 500 - 5P, where P is the selling price per unit in dollars. The fixed cost of production is $1,000 per month and the variable cost of production is $20 per unit. The profit-maximizing quantity is _______________. A. 155 B. 195 C. 200 D. 245 E. None of the above Use the following information for Problems 10-14: A company...

Please use Brazil and New Zealand to create a table that compares two societal cultures on...

Please use Brazil and New Zealand to create a table that compares two societal cultures on the nine dimensions of culture identified by the GLOBE project. Depending on the countries you choose, you may need to do more research. Your table should have three columns, one with the nine dimensions, one with the first country, and one with the second country. Your table should include the scores and an explanation of what the scores mean. Following is an example of...

Table 1 Price Quantity Demanded Quantity Supplied $10 10 60 $8 20 45 $6 30 30...

Table 1 Price Quantity Demanded Quantity Supplied $10 10 60 $8 20 45 $6 30 30 $4 40 15 $2 50 0 1 Refer to Table 1. The equilibrium price and quantity, respectively, are a. $2 and 50. b. $6 and 30. c. $6 and 60. d. $12 and 30. 2. . Refer to Table 1. If the price were $8, a a. shortage of 20 units would exist and price would tend to rise. b. surplus of 25 units...

1) Identify the class width for the given Frequency Distribution Table List -------------Frequency 10 to 14...

1) Identify the class width for the given Frequency Distribution Table List -------------Frequency 10 to 14 -------------27 15 to 19 -------------35 20 to 24 -------------14 25 to 29 --------------2 30 to 34 --------------4 35 to 39 --------------2 40 to 44 --------------1 2) Which measurement is the most accurate? Mode Mean Range Median

1. Use the information in this table to sketch a business cycle and to label a...

1. Use the information in this table to sketch a business cycle and to label a downturn and a recovery. 2. (Table) The table that follows shows components of aggregate expenditures. What is GDP according to the expenditure approach? What is GDP according to the expenditure approach?

1-For the following state table

1-For the following state table PresentNext stateOutputstate0101afb00bda00dga10ffb11ggd01Note: Equivalent states: b=e, a=c, h=d(a) Draw the corresponding state diagram. (b) Tabulate the reduced state table. (c) Draw the state diagram corresponding to the reduced state table. 2- A sequential circuit has two JK flip-flops A and B and one input X. The circuit is described by the following flip-flop input equations: JA = X' KA = A JB = B' KB = X (a) Drive the state equations A (t1 and B (t +1) by substituting the input equations for the J and...

PREGUNTA 14 Use the following information to answer questions 14 to 18. to A certain brand...

PREGUNTA 14 Use the following information to answer questions 14 to 18. to A certain brand of apple juice is supposed to have 64 ounces of juice. Because the punishment for under-filling bottles is severe, the target mean amount of juice is 64.05 ounces. It is known that the standard deviation of the population is 0.06. However, the filling machine is not precise, and the exact amount of juice varies from bottle to bottle. The quality – control manager wishes to verify that...

Benito Company reported the following information for the financial year ended 30/06/2020: Profit from ordinary activities...

Benito Company reported the following information for the financial year ended 30/06/2020: Profit from ordinary activities before income tax expense $986,000 Cash received from customers / Accounts receivables 80,000 Paid to suppliers / Accounts payable 80,000 Cash received from the sale of Land 28,000 Obtained a loan from Good Bank 60,000 Purchase a motor vehicle for cash 80,000 Share issues 120,000 Salary & wages paid 16,000 Dividend paid 14,000 Annual leave paid 20,000 Interest received from an investment 4,000 Purchased...