Question: An effective way to reduce risk without sacrificing expected return is diversification. As a fine dvising your clients to spread their risk across an equity

An effective way to reduce risk without sacrificing expected return is

diversification. As a fine dvising your clients to spread their risk across

An effective way to reduce risk without sacrificing expected return is diversification. As a fine dvising your clients to spread their risk across an equity mutual fund with the following infor State of Economy Probability Fund A Fund B 0.6FundA + 0.4FundB Recession 0.2 0.08 -0.15 Normal 0.5 0.15 0.10 Boom 0.3 0.03 0.20 Assume are considering a portfolio that invests 60% and 40% in Fund A and Fund B, respectiv a) What are the portfolio returns in each scenario? What are the expected returns for each fun b) What is the average volatility of the two funds? c) What is the correlation between the two funds? d) Can you reduce the volatility by holding the portfolio, and why? How much risk can you with the average volatility

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!

4. An effective way to reduce risk without sacrificing expected return is diversification. As a financial adviser you are advising your clients to spread their risk across an equity mutual fund with...

Hey i need you help with my Portfolio final report. i get some of them and want you to finish it, i will upload the professor sample report, and half of my work, plus the week 4 and week 5 report...

I need help with these 10 questions. Please make sure you are familiar with these types of problems. Thank you 1) Toni's Typesetters is analyzing a possible merger with Pete's Print Shop. Toni's has...

Case Study: MANAGING DIVERSITY IN THE HOTEL INDUSTRY : THE CASE OF YOGYAKARTA, INDONESIA Dr. James J. Spillane, S.J. I. INTRODUCTION One of the major developments in the global economy during the...

On a Saturday morning in late September 2015, Susie sat over her breakfast, which was rapidly turning cold, and reflected on the extra cash that she had in her bank account. She was mulling over the...

Question 1 Client Profile: Martin is a portfolio manager with Prudent Investment Advisors, Inc., a registered investment advisory firm in Denver, Colorado. His new clients, Margaret (age 42) and...

you are advising your clients to spread their risk across an equity mutual fund with the following information state of economy Probability Fund a Fund b 0.6FundA + 0.4FundB Recession 0.2 0.08 -0.15...

Assignment for Chapter Twenty-Three You are 25 years old and at your work place in their 401k they have given you four mutual funds to choose from to put your money for retirement. T. Rowe Price Cash...

Please I need help with the ratios mention bellow. Find necessary information the complete the assignment on the attachments, Which include PDF of the 10k. Thanks Calculate the following ratios for...

Hello, I have a case study need be answeredregarding pdf files questions, 1.Research the capacity of municipalities in Bosnia and Herzegovina for issuing a bonds? 2.What are pros and cons of bond...

The population of Russia dropped from 150 million in 1995 to 142.9 million in 2006. Assume that P(t), the population in millions, t years after 1995 is decreasing according to the exponential decay...

Persistent invasions of consumer privacy will be the undoing of online advertising. Is this statement true or false? Conduct some online secondary research on this issue. Report on your findings.

Discuss the meaning of the following selections: a. The universe is a macrocosm of creative energy and power, and every man, woman, and child is the epitome of this totality of the cosmos. Within...

On January 1, 2019, the ledger of Accardo Company contains the following liability accounts. Accounts Payable................................$52,000 Sales Taxes...

Gill Company, organized in 2014, has the following transactions related to intangible assets . Instructions Prepare the necessary entries to record these intangibles. All costs incurred were for...

On July 1, 2019, Friedman Inc. invested $720,000 in a mine estimated to have 900,000 tons of ore of uniform grade. During the last 6 months of 2019, 100,000 tons of ore were mined. Instructions (a)...

a. Given the following information, calculate the expected value for Firm Cs EPS. Data for Firms A and B are as follows: E(EPS A ) = $5.10, and A = $3.61; E(EPS B ) = $4.20, and B = $2.96. b. You...

Remmers Corporation, a publicly traded company, was organized on January 1, 2015. It is authorized to issue an unlimited number of $3 noncumulative preferred shares and an unlimited number of common...

The systems development life cycle (SDLC) is a formal multi-stage process through which information systems are implemented. It consists of five (5) phases, i.e. Planning, Analysis, Design,...

3. What does it mean when we say that we attribute a certain meaning to our experiences?

2. In this chapter, the reader should reflect on the following concepts : Thomas theorem, premise of action, utterance and mental constructions.

11. Based on the following rules regarding the confidence we have in information in a communication context, find examples from your everyday life where the rules have relevance: (a) The spatial rule...