Tyler Trucks stock has an annual return mean and standard deviation of 15 percen
ID: 2769235 • Letter: T
Question
Tyler Trucks stock has an annual return mean and standard deviation of 15 percent and 38 percent, respectively. Michael Moped Manufacturing stock has an annual return mean and standard deviation of 11.4 percent and 56 percent, respectively. Your portfolio allocates equal funds to Tyler Trucks stock and Michael Moped Manufacturing stock. The return correlation between Tyler Trucks and Michael Moped Manufacturing is .5. What is the smallest expected loss for your portfolio in the coming month with a probability of 16.0 percent?
Tyler Trucks stock has an annual return mean and standard deviation of 15 percent and 38 percent, respectively. Michael Moped Manufacturing stock has an annual return mean and standard deviation of 11.4 percent and 56 percent, respectively. Your portfolio allocates equal funds to Tyler Trucks stock and Michael Moped Manufacturing stock. The return correlation between Tyler Trucks and Michael Moped Manufacturing is .5. What is the smallest expected loss for your portfolio in the coming month with a probability of 16.0 percent?
Tyler Trucks stock has an annual return mean and standard deviation of 15 percent and 38 percent, respectively. Michael Moped Manufacturing stock has an annual return mean and standard deviation of 11.4 percent and 56 percent, respectively. Your portfolio allocates equal funds to Tyler Trucks stock and Michael Moped Manufacturing stock. The return correlation between Tyler Trucks and Michael Moped Manufacturing is.5. What is the smallest expected loss for your portfolio in the coming month with a probability of 16.0 percent? (Negative value should be indicated by a minus sign. Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Omit the "%" sign in your response.)Explanation / Answer
Explanation:
E(R) = (0.15 + 0.114) / 2 = 0.264 / 2
E(R) = 0.132 or 13.2%
Standard deviation = [(0.5) 2 (38) 2 + (0.5) 2 (56) 2 + 2 * (0.5) * (0.5) * (38) * (56) * (0.5)]
Standard deviation = 361 + 784 + 532
Standard deviation = (1677 / 12) 1/ 2
Standard deviation = 11.8215
Prob = 0.132 – ( 1.96 * 11.8215 ) = -23.038
Smallest expected loss = -23.038 %
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