1. Based on the table below, what is the expected return of the stock? 2. You in
ID: 2622908 • Letter: 1
Question
1. Based on the table below, what is the expected return of the stock?
2. You invested $3,000 in a portfolio with an expected return of 10 percent and $2,000 in a portfolio with an expected return of 16 percent. What is the expected return of the combined portfolio?
3. The covariance of the returns between Einstein Stock and Bohr Stock is 0.0087. The standard deviation of Einstein is 0.26, and the standard deviation of Bohr is 0.37. What is the correlation coefficient between the returns of the two stocks?
Probability Return .20 8% .10 10% .40 12% .20 15% .10 20%Explanation / Answer
1) expected return will be
0.08*0.20 + 0.1*0.1 + 0.12*0.4 + 0.15*0.2 + 0.2*0.1
= 0.124
=12.4%
2)
IT WILL be
3000*0.10 + 2000*0.16
= 620
3)0.0087 = x*0.26*0.37
=> x = 11.05
4) false
5)it will be
(0.7)^2(0.7)^2 + (0.3)^2(0.8^2) + 2(0.7)(0.3)(0.1)(0.7)(0.8)
= 0.32122
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