Question

In: Finance

What are her expected returns and the risk from her investment in the three​ assets? How...

What are her expected returns and the risk from her investment in the three​ assets? How do they compare with investing in asset M​ alone?  

Hint​:

Find the standard deviations of asset M and of the portfolio equally invested in assets​ M, N, and O.

b.  Could Sally reduce her total risk even more by using assets M and N​ only, assets M and O​ only, or assets N and O​ only? Use a​ 50/50 split between the asset​ pairs, and find the standard deviation of each asset pair.

  States

Probability

Asset M Return

Asset N Return

Asset O Return

  Boom

26​%

11​%

20​%

3​%

  Normal

47​%

9​%

13​%

9​%

  Recession

27​%

3​%

0​%

11​%

Solutions

Expert Solution

jeff jeffy answered 6 months ago
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