Question

1. Your asset has the following possible returns and probabilities that those returns will be realized:  10% chance of 12% return, 12% chance of a 10% return, 40% chance of an 8% return, 28% chance of a 5% return, and 10% chance of a -2% return.  
   1. Calculate the expected return
   2. Calculate the standard deviation
   3. Calculate the Coefficient of Variation = standard deviation/expected return.

2. An investment banker has recommended a $100,000 portfolio containing three assets. $20,000 will be invested in the U.S. dollar, with a beta of 5; $50,000 will be invested in silver, with a beta of -.5; and $30,000 will be invested in Microsoft, with a beta of 0.5. Calculate the weights for each stock in the portfolio and calculate the portfolio beta.

3 Akai has a portfolio of three assets. Find the expected rate of return for the portfolio assuming he invests 50 percent of his money in Wal-Mart with a 10 percent rate of return, 30 percent in Apple with a 20 percent rate of return, and the rest in gold with a 30 percent rate of return

Answer 1

Q1.

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Q2.

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Q3.

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