(All these questions are part of the same question) An investor purchases an ass

Question

(All these questions are part of the same question)

An investor purchases an asset on October 26 2011 for $50,000, and sells it for $85,000 the next year. The asset generated cash flows of $10,000 over this period. The investor

a. does not experience a gain, but enjpys $10,000 income

b. experiences an unrealized gain of $35,000 and income of $10,000 over this period

c. experiences a realized gain of $35,000 and income of $10,000 over this period

d. experiences a realized gain of $45,000 over this period

What is the portfolio standard deviation

2010 (Year) 14.0% (Stock A)

2011 6.0%

2012 2.0%

2013 -6.5%

2014 2.3%

4 What is the expected (use arithmetic average) return for 2014 and sample standard deviation for company A X Sx A

5 What is the coefficient of variation for company A

Explanation / Answer

Asset generated cash flow = 10000 is income and profit from sale of asset = 85000-50000 = 35000 is realized gain.It is realized gain since he sold the asset.

4. expected return = (14+6+2-6.5+2.3)/5 = 3.56
sample variance = (10.44^2 +2.44^2 +1.56^2 +10.06^2 + 1.26^2)/4 = 55.04
Sample standard variation = sqrt (Variance) = 7.42

5. Coefficient of variation = standard deviation/ Average = 2.08

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