Suppose that you have a project that has a .7 chance of doubling your investment in a year and a .3 chance of halving your investment in a year. What is the standard deviation of the rate of return on this investment?
Answer to relevant QuestionsThe correlation coefficients between pairs of stocks is as follows: Corr (A, B) = .85; Corr (A, C) = .60; Corr (A, D) =.45 Each stock has an expected return of 8 percent and a standard deviation of 20 percent. If you’re ...Repeat problem 24 using a correlation of .3. (If you cannot calculate the three- year covariance in problem 26, assume it is .005.) If the simple CAPM is valid, which of the following situations are possible? Explain. Consider each situation independently. Assume that both portfolios A and B are well diversified, that E( rA) = .12, and E( rB) = .09. If the economy has only one factor, and ßA = 1.2 whereas ßB = .8, what must the risk- free rate be? Use the data from The Financial Post in Figure 10.8 to construct the trin ratio for the TSX. Is the trin ratio bullish or bearish?
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