Question: don't do it with excel please Problem 3 (10 points) For next year, the expected returns of ABC's stock, taking into account the different predictions
Problem 3 (10 points) For next year, the expected returns of ABC's stock, taking into account the different predictions and their respective probabilities, would be summarized in the following table: Pessimist Realistic Optimistic Expected return (%) 5.00% 8.00% 12.00% Probability 30% 60% 10% a) Calculate the expected return of the ABC company. (2 points) b) Calculate the standard deviation of ABC Company's returns. (2 points) You have a sum of money that you plan to invest in the stock market. 12.00% 14.00% Expected return (%) Standard deviation of yield in (%) 1.8000% 1.3000% c) If you wanted to invest in only one of these two securities, X or Y, which one do you consider? What for? (2 points) d) If you decide to invest 60% of your assets in share X and 40% in share Y, calculate the expected return and the standard deviation of your portfolio knowing that the correlation coefficient between the two securities is 0.73. (2 points) e) If you decide to invest 45% of your assets in Share X and the rest in a risk-free Canadian government bond with an annual return of 6%, calculate the expected return and standard deviation of the returns on your new portfolio. (2 points) 12.00% Expected return (%) Standard deviation of yield in (%) 1.8000%
Step by Step Solution
There are 3 Steps involved in it
Get step-by-step solutions from verified subject matter experts
