Consider a portfolio with $3,697 invested in Asset A and $4,421 invested in Asset B with...

Consider a portfolio with $3,697 invested in Asset A and $4,421 invested in Asset B with the following returns and probabilities. What is the rate of return on the portfolio pay when a LOSS occurs? (round the the nearest whole percentage ##%, include a negative sign if appropriate )

State	Probability	Asset A	Asset B
WIN	0.7	24%	39%
TIE	0.2	7%	6%
LOSS	0.1	-3%	-9%

_______

Solutions

Expert Solution

Portfolio Ret= weighted avg ret of securties in that portfolio.

Portfolio Ret when Loss occurs:

Stock	Amount	Weight	Ret	WTd Ret
Asset A	3697	0.4554	-3.00%	-1.37%
Asset B	4421	0.5446	-9.00%	-4.90%
Portfolio Ret Return				-6.27%

Portfolio Ret when Loss occurs is -6.27%

Nearest whole % is -6%

jeff jeffy answered 1 year ago

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