quuiutative Methods for Finance (Fall 2018) haotian shen &I 9/9/18 5:09 PM Homew
ID: 3068868 • Letter: Q
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quuiutative Methods for Finance (Fall 2018) haotian shen &I 9/9/18 5:09 PM Homework: Homework 1 Save DJ Score: 0 of 3 pts 17 of 22 (22 complete) Hw Score: 88%, 22 of 25 pts Exercise 2.22 Question Help | money to invest- for simplicity, $1-and you are planning to put a fraction w into a stock market mutual fund and the rest, 1 - w, into a bond mutual fund. Suppose that $1 invested in a stock fund yields R after 1 year and that $ 1 invested in a bond fund yields R, suppose that R, is random with mean 0.08 (8%) and standard deviation 0.07, and suppose that Rb is random with mean OOS 5%) and standard de at place a fraction w of your money in the stock fund and the rest, - w, in the bond fund, then the return on your investment is RewR, (1-wR 1 that w = 0.49. Compute the mean and standard deviation or R The mean is (Round your response to three decimal places.) The standard deviation is (Round your response to three decimal places) Enter your answer in the edit fields and then click Check Answer Check Answer Clear All 4 remtainingExplanation / Answer
here mean =E(R)=w*E(Rs)+(1-w)*E(Rb) =0.49*0.08+0.51*0.05 =0.065
std deviation =sqrt((0.49*0.07)2+(0.51*0.04)2+2*0.24*0.49*0.07*0.51*0.04)=0.044
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