Question: 3. Set (B) [10 Marks] Based on the scenario below, what is the expected return for a portfolio with the following return profile? Bear Normal

3. Set (B) [10 Marks]

Based on the scenario below, what is the expected return for a portfolio with the following return profile?

Bear

Normal

Bull

Probability

0.4

0.2

0.4

Rate of return

-20%

10%

20%

Answer the following questions based on below table:

Bear

Normal

Bull

Probability

0.4

0.2

0.4

Stock X

-10%

15%

40%

Stock Y

-12%

20%

20%
  1. What are the expected returns for stock X and Y? [ 3 Marks]
  2. What are the standard deviations of returns on stock X and Y? [ 3 Marks]
  3. Assume that of your Rs 1,00,000 portfolio, you invest Rs 80000 in Stock X and rest in Stock Y. What is the expected return on portfolio? [ 4 Marks]

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!

Q:

(a) Based on the scenario below, what is the expected return for a portfolio with the following return profile? [2 marks] Bear Normal Bull Probability 0.4 0.2 0.4 Rate of return -20% 10% 20% Answer...

Q:

Question 3 (25 marks) Johnny has $400,000 to invest and is considering the merits of two stocks: HCBC & SBB. The two stocks have the following possible expected future returns: State of Affair Boom...

Q:

INVESTMENT MANAGEMENT (RISK AND RETURN) NB : Show workings to all questions that led to the answer Question 1 . Use the table below to answer the questions given Year Return on stock A % Return on...

Q:

Based on the scenario below, what is the expected return for a portfolio with the following return profile? Market Condition Bear Normal Bull Probability 0.2 0.3 0.5 Rate of return -25% 10% 24%

Q:

1. Describing Individual Stocks Return & Risk Ex ante approach (projecting the possible futures) Following table summarizes the possible returns of next period for two stocks under different market...

Q:

Question 2 Equity X is the stock of a company that produces confectionary. Equity Y is the stock of company that manufactures sports cars. The table below presents the share price returns to Equity X...

Q:

Question 3 (25 marks) Johnny has $400,000 to invest and is considering the merits of two stocks: HCBC & SBB. The two stocks have the following possible expected future returns: State of Affair Boom...

Q:

Question 3 (25 marks) Johnny has $400,000 to invest and is considering the merits of two stocks: HCBC & SBB. The two stocks have the following possible expected future returns: State of Affair Boom...

Q:

PLEASE WRITE THE ANSWERS IN WRITTEN/TPYED FORMAT, NO EXCEL Question 3 (25 marks) Johnny has $400,000 to invest and is considering the merits of two stocks: HCBC & SBB. The two stocks have the...

Q:

Question 3 (25 marks) Johnny has $400,000 to invest and is considering the merits of two stocks: HCBC & SBB. The two stocks have the following possible expected future returns: State of Affair Boom...

Q:

Non-financial variances. Daisy Canine Products produces high quality dog food distributed only through veterinary offices. To ensure that the food is of the highest quality and has taste appeal,...

Q:

Assume a primary government appoints a voting majority of the governing board of a legally separate organization. When determining the financial reporting entity, what other requirements must be met...

Q:

The fact that a lender pays special attention to control the ratio between the borrower's total housing expense and income is consistent to the ability to pay theory of default. the equity theory of...

Q:

Discuss several ways ( at least four ways ) to improve the requirement process and thus, a project team can avoid a situation where too many changes to the project requirements occur at the later...

Q:

In what circumstances would learning be promoted through use of the case study method or simulations?

Q:

What experiences have you had with role playing in training? Under what conditions might a role play be effective? Ineffective?

Q:

State and justify your opinion regarding the effectiveness of the lecture method. What can be done to ensure a lecture is effective?