Ask Question, Ask an Expert

+1-415-315-9853

info@mywordsolution.com

Ask Basic Finance Expert

There are three securities in the market. The following chart shows their possible payoffs:

State Probability of Return on Return on Return on
Outcome Security1 security2 Security3

1 .15 .25 .25 .10
2 .35 .20 .15 .15
3 .35 .15 .20 .20
4 .15 .10 .10 .25

a) What are the expected return and standard deviation of each security?

b) What are the covariances and correlations between the pairs of securities?

c) What are the expected return and standard deviation of a portfolio with half of its funds invested in security 1 and half in security 2?

d) What are the expected return and standard deviation of a portfolio with half of its funds invested in security 1 and half in security 3?

e) What are the expected return and standard deviation of a portfolio with half of its funds invested in security 2 and half in security 3?

f) What do your answers in parts (a), (c), (d), (e) imply about diversification?

 

Basic Finance, Finance

  • Category:- Basic Finance
  • Reference No.:- M928721

Have any Question? 


Related Questions in Basic Finance

Design a randomized groups experiment to test the

Design a randomized groups experiment to test the hypothesis that children who watch an hour-long violent television show subsequently play in a more aggressive fashion than children who watch a nonviolent TV show or who ...

Jordan bought a 4 semi annual coupon bond with 25 years to

Jordan bought a 4% semi annual coupon bond with 25 years to maturity par value at $1,000. If the required rate of return (Yield to maturity) of this bond increases to 4.25%, by how much does the value of the bond change? ...

How many variance and covariance terms does the expression

How many variance and covariance terms does the expression of variance on a 5 asset portfolio have?

1 what is credit rationing why would a lender ration credit

1. What is credit rationing? Why would a lender ration credit rather than raise the interest rate it charges on loans? 2. What is the Securities and Exchange Commission (SEC)? Why was it founded? What effect has the SEC ...

Assuming the borrower is in no danger of default under what

Assuming the borrower is in no danger of default, under what conditions might a lender be willing to accept a lesser amount from a borrower than the outstanding balance of a loan and still consider the loan paid in full?

A multiple-choice test consists of 7 questions each

A multiple-choice test consists of 7 questions. Each question has answer choices of a, b, c, and d, and only one of the choices is correct. If a student randomly guesses on each question, what is the probability that she ...

1 case 1 - carolyn bowen who just turned 55 is employed as

1. Case 1 - Carolyn Bowen, who just turned 55, is employed as an administrative assistant for the Xcon Corporation, where she has worked for the past 20 years. She is in good health, lives alone, and has two grown childr ...

It is essential that you have a solid grounding in the

It is essential that you have a solid grounding in the academic theories of investing. In your final assignment, compare and contrast the academic theories of investing covered in your required readings with the philosop ...

1 the common stock of buildwell construction has a beta of

1) The common stock of Buildwell Construction has a beta of 0.90. The T-bill rate is 4% and the market risk premium is estimated at 8%. Buildwell's capital structure is 30% debt, paying a 5% interest rate and 70% equity. ...

Write 3-5 pages on the implementation of dodd-frank and the

Write 3-5 pages on the implementation of Dodd-Frank and the qualified mortgage rules in Dodd-Frank: specifically, concentrate on how small community banks have been treated relative to other institutions since the onset ...

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

Section onea in an atwood machine suppose two objects of

SECTION ONE (a) In an Atwood Machine, suppose two objects of unequal mass are hung vertically over a frictionless

Part 1you work in hr for a company that operates a factory

Part 1: You work in HR for a company that operates a factory manufacturing fiberglass. There are several hundred empl

Details on advanced accounting paperthis paper is intended

DETAILS ON ADVANCED ACCOUNTING PAPER This paper is intended for students to apply the theoretical knowledge around ac

Create a provider database and related reports and queries

Create a provider database and related reports and queries to capture contact information for potential PC component pro

Describe what you learned about the impact of economic

Describe what you learned about the impact of economic, social, and demographic trends affecting the US labor environmen