Question
In: Math
Suppose there are two one-year assets. You cannot buy a fractional portion of either asset. Asset...
Suppose there are two one-year assets. You cannot buy a fractional portion of either asset. Asset A costs $100 to buy and in one year pays a total of either $120 or $90, with equal probability. Asset B costs $200 to buy and in one year pays a total of either $180 or $240. When Asset A pays $120, Asset B pays $180 (and when Asset A pays $90, asset B Pays $240). You buy two of Asset A and one of asset B. What is the standard deviation of the rate of return on your investment? (Hint: define a new asset C = 2A +B). Express your answer in decimal form without a percent sign and rounded and accurate to 4 decimal place.
Solutions
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milcah answered 1 year agoRelated Solutions
Suppose there are two one-year assets. You cannot buy a fractional portion of either asset. Asset...
Suppose there are two one-year assets. You cannot buy a
fractional portion of either asset. Asset A costs $100 to buy and
in one year pays a total of either $120 or $90, with equal
probability. Asset B costs $200 to buy and in one year pays a total
of either $180 or $240. When Asset A pays $120, Asset B pays $180
(and when Asset A pays $90, asset B Pays $240). You buy two of
Asset A and...
1. Suppose there are two assets, Asset 1 and Asset 2. You are given the following...
1.
Suppose there are two assets, Asset 1 and Asset 2. You are given
the following information about the two assets.
E(R1) =
0.12
E(s1) = 0.05
E(R2) =
0.20
E(s2) = 0.08
Calculate the expected returns and expected standard deviations
of a two-stock portfolio in which Stock 1 has a weight of 70
percent under the following conditions.
r1,2 = 1.00
r1,2 = 0.50
r1,2 = 0.00
r1,2 = –0.50
r1,2 = –1.00
Show your calculations.
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