Question

In: Finance

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 2 years ago
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