As the Chief Risk Officer of Digital Assets Inc., you need to determine the weighted probability of
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Question:
As the Chief Risk Officer of Digital Assets Inc., you need to determine the weighted probability of returns of the firm's $10 million allocation to Dogecoin. Below is a probability table of potential returns for the firm's bitcoin investment:
Return Probability
200% 2.5%
100% 5%
45% 20%
15% 31%
-15% 18%
-30% 14%
-60% 9.5%
A. Calculate the weighted probability of returns in a percentage and dollar amount (show the calculations).
B. Based on the above table, what is the maximum dollar amount the portfolio could return?
C. Based on the above table, what is largest dollar loss the portfolio could experience?
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