Darren is considering the following investments; Alphabet, PayZero and FNQ Res.: Probability of return Likely Return...
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Darren is considering the following investments; Alphabet, PayZero and FNQ Res.: Probability of return Likely Return FNQ Res. (%) (%) 20 30 40 10 Likely Return Alphabet (%) Asset Weighting (%) Alphabet PayZero FNQ Res. 6 9 16 18 Likely Return PayZero (%) Weighting (%) 20 55 25 4 7 10 14 9 14 19 26 a) Calculate the expected return for each asset. (6 marks) b) Calculate the expected return on a portfolio comprising each asset weighted as follows (6 marks) FI c) Explain to Darren the benefit of combining the assets into a portfolio instead of undertaking individual investments in Alphabet, PayZero and FNQ Res. (4 marks) d) Calculate the risk attached to each of the investments proposed in Alphabet, PayZero and FNQ Res. Rank each investment in regard to its risk and return. Discuss the likely range of returns that could eventuate for each asset with a 95% level of accuracy. (16 marks) Darren is considering the following investments; Alphabet, PayZero and FNQ Res.: Probability of return Likely Return FNQ Res. (%) (%) 20 30 40 10 Likely Return Alphabet (%) Asset Weighting (%) Alphabet PayZero FNQ Res. 6 9 16 18 Likely Return PayZero (%) Weighting (%) 20 55 25 4 7 10 14 9 14 19 26 a) Calculate the expected return for each asset. (6 marks) b) Calculate the expected return on a portfolio comprising each asset weighted as follows (6 marks) FI c) Explain to Darren the benefit of combining the assets into a portfolio instead of undertaking individual investments in Alphabet, PayZero and FNQ Res. (4 marks) d) Calculate the risk attached to each of the investments proposed in Alphabet, PayZero and FNQ Res. Rank each investment in regard to its risk and return. Discuss the likely range of returns that could eventuate for each asset with a 95% level of accuracy. (16 marks)
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Answer rating: 100% (QA)
SOLUTION a To calculate the expected return for each asset we multiply each likely return by its corresponding probability and sum the results Expecte... View the full answer
Related Book For
Accounting Information Systems
ISBN: 978-0133428537
13th edition
Authors: Marshall B. Romney, Paul J. Steinbart
Posted Date:
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