Question
In: Finance
Q1. Given the following Information Investment Expected return Standard deviation 1 0.12 0.3 2 0.15 0.5...
Q1. Given the following Information
Investment Expected return Standard deviation
1 0.12 0.3
2 0.15 0.5
3 0.21 0.16
4 0.24 0.21
U=E(r) - (A/2)s2 , where A=4.0
a) Briefly describe the variable of E(r), s and A and how these variables affect the utility of individual. b) Based on the utility function above, which investment would you select? (shows your calculation. c) Redo part (b) if the investor is risk neutral.
Solutions
jeff jeffy answered 1 year agoRelated Solutions
Given the following information: Expected return on Stock A .15 (15%) Standard deviation of return 0.3...
Given the following
information:
Expected return on Stock A
.15 (15%)
Standard deviation of return
0.3
Expected return on Stock B
.18 (18%)
Standard deviation of return
0.4
Correlation coefficient of the returns
on Stock A and Stock B
0.75
a. What are the expected returns and
standard deviations of the following
portfolios?
1. 100 percent of funds invested in
Stock A
2. 100 percent of funds invested in Stock B
3. 50 percent of funds invested in each stock?...
Given the following information: Expected return on Stock A .15 (15%) Standard deviation of return 0.3...
Given the following information:
Expected return on Stock A .15 (15%)
Standard deviation of return 0.3
Expected return on Stock B .18 (18%)
Standard deviation of return 0.4
Correlation coefficient of the returns on Stock A and Stock B
0.75
a. What are the expected returns and standard deviations of the
following portfolios?
1. 100 percent of funds invested in Stock A
2. 100 percent of funds invested in Stock B
3. 50 percent of funds invested in each stock?...
A portfolio has an expected rate of return of 0.15 and a standard deviation of 0.15....
A portfolio has an expected rate of return of 0.15 and a
standard deviation of 0.15. The risk-free rate is 6%. An investor
has the following utility function: U = E(r) - (A/2)s 2 . Which
value of A makes this investor indifferent between the risky
portfolio and the risk-free asset?
How would I complete this on a scientific calculator?
For example, you cannot put algebra into a scientific calculator.
So I'll need to do it manually, is it possible...
A. Suppose you have an asset with an expected return of 0.12 and a standard deviation...
A. Suppose you have an asset with an expected return of
0.12 and a standard deviation of 0.18. If the riskless rate is
0.04, what combination of the risky asset and a riskless asset
would give you an expected return of 0.09? What would be the
standard deviation of this combination? (5 pts.)
B.Find the proportion of risky and riskless assets
contained in a combined portfolio whose expected return is 0.12 per
year, where the riskless rate is 0.05 and...
Given the following information, calculate the expected return and standard deviation for a portfolio that has...
Given the following information, calculate the expected return
and standard deviation for a portfolio that has 50 percent invested
in Stock A, 20 percent in Stock B, and the balance in Stock C.
(Do not round intermediate calculations. Enter your answers
as a percent rounded to 2 decimal places.)
Returns
State of
Economy
Probability of
State of Economy
Stock A
Stock B
Stock C
Boom
.80
15
%
18
%
25
%
Bust
.20
16
0
−16
Expected return:__________%
Standard...
Given the following information, calculate the expected return and standard deviation for a portfolio that has...
Given the following information, calculate the expected return
and standard deviation for a portfolio that has 25 percent invested
in Stock A, 32 percent in Stock B, and the balance in Stock C.
(Do not round intermediate calculations. Enter your answers
as a percent rounded to 2 decimal places.
Returns
State of Economy
Probability of State of Economy
Stock A
Stock B
Stock C
Boom
0.30
10
%
19
%
20
%
Bust
0.70
11
0
−11
Expected return
%...
Table.1 Risky Asset 1 Risky Asset 2 Expected Return 0.12 .16 Standard Deviation 0.29 .89 The...
Table.1
Risky Asset 1
Risky Asset 2
Expected Return
0.12
.16
Standard Deviation
0.29
.89
The coefficient of correlation ρ between these two assets is
equal to .009, and the risk free rate is 3.8%.
1) If you wished to construct the optimal risky portfolio using
these two assets, what percentage this portfolio would consist of
Asset 1?
2) What is the expected return of the portfolio from question
1?
3) What is the standard deviation of the portfolio from...
You are given the following information on two securities. Security Expected Return Standard Deviation of Returns...
You are given the following information on two securities.
Security
Expected Return
Standard Deviation of Returns
A
10.0%
14.0%
B
16.0%
12.0%
The correlation between the returns on the two securities is
+0.6. The standard deviation of returns of a portfolio earning an
expected return of 14.0 percent is closest to:
Group of answer choices
A 11.4%.
B 9.3%.
C 27.1%.
D 12.7%.
ased on the following information, the expected return and standard deviation for Stock A are ________percent...
ased on the following information, the expected return and
standard deviation for Stock A are ________percent and
________percent, respectively. The expected return and standard
deviation for Stock B are _______ percent and ______percent,
respectively. (Do not include the percent signs (%). Round
your answers to 2 decimal places. (e.g., 32.16))
Rate of Return if State Occurs
State of
Economy
Probability of
State
of Economy
Stock A
Stock B
Recession
0.1
0.04
-0.2
Normal
0.7
0.09
...
Use the following information to calculate the expected return and standard deviation of a portfolio that...
Use the following information to calculate the expected return
and standard deviation of a portfolio that is 30 percent invested
in 3 Doors, Inc., and 70 percent invested in Down Co.
3 Doors, Inc
Down Co
Expected Return, E(R)
18%
14%
Standard deviation
48
50
Correlation .33
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