1. Calculate the expected return, standard deviation, and coefficient of variation for Treasury Bills, Innovate Inc.,...

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1. Calculate the expected return, standard deviation, and coefficient of variation for Treasury Bills, Innovate Inc., Stodgy Corp, and Gold Mine Holdings. 2. Compare and contrast each of the four investments based upon their risk and return characteristics. 3. If you create an equally weighted portfolio composed of these four investments, what would your expected return be for each state of the Economy? That is, if you create a portfolio that is 25% Treasury Bills, 25% Innovate, 25% Stodgy, and 25% Gold Mine Holdings, what return would you expect for each state of the economy? 4. Calculate the expected return, standard deviation, and coefficient of variation for the equally weighted portfolio described in part 3. 5. If you wanted to reduce the standard deviation of the portfolio by removing one investment, which investment would you choose to remove? Why? State of the Probability Treasury Economy Bills Recession Below Ave. Average Above Ave. Boom 0.1 0.2 0.3 0.2 0.2 3% 3% 3% 3% 3% Innovate Stodgy Inc. Corp. -30% -15% 8% 22% 40% -10% -3% 5% 8% 12% Gold Mine Holdings 25% 12% 8% 6% 3% Equally Weighted Portfolio 1. Calculate the expected return, standard deviation, and coefficient of variation for Treasury Bills, Innovate Inc., Stodgy Corp, and Gold Mine Holdings. 2. Compare and contrast each of the four investments based upon their risk and return characteristics. 3. If you create an equally weighted portfolio composed of these four investments, what would your expected return be for each state of the Economy? That is, if you create a portfolio that is 25% Treasury Bills, 25% Innovate, 25% Stodgy, and 25% Gold Mine Holdings, what return would you expect for each state of the economy? 4. Calculate the expected return, standard deviation, and coefficient of variation for the equally weighted portfolio described in part 3. 5. If you wanted to reduce the standard deviation of the portfolio by removing one investment, which investment would you choose to remove? Why? State of the Probability Treasury Economy Bills Recession Below Ave. Average Above Ave. Boom 0.1 0.2 0.3 0.2 0.2 3% 3% 3% 3% 3% Innovate Stodgy Inc. Corp. -30% -15% 8% 22% 40% -10% -3% 5% 8% 12% Gold Mine Holdings 25% 12% 8% 6% 3% Equally Weighted Portfolio

Answer rating: 100% (QA)

1 Treasury Bills Expected Return 3 Standard Deviation 0 Coefficient of Variation 0 Innovate Inc Expe... View the full answer