Steven Harper is considering ABC Limited and XYZ Inc. for investment of $200,000. Given the following...
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Steven Harper is considering ABC Limited and XYZ Inc. for investment of $200,000. Given the following information: State of ABC Rate of Return 35% 20% 10% 1.8 Expected T-bill rate of return = 4.5% Assume equilibrium, i.e. expected return = required return a. What is the expected rate of return and standard deviation for ABC? and XYZ? b. What is the expected rate of return, and standard deviation, and Beta for the portfolio if Steven's investment in XYZ is 50% more than his investment in ABC? Economy Boom Normal Bust XYZ Rate of Return 60% 0% Probability 0.30 0.50 0.20 Beta 40% 2.15 c. Given the answers to a and b, Steven should invest in ABC? or in XYZ? or in the portfolio consisting of ABC and XYZ? (Hint: It will be useful to find the coefficients of variation). Steven Harper is considering ABC Limited and XYZ Inc. for investment of $200,000. Given the following information: State of ABC Rate of Return 35% 20% 10% 1.8 Expected T-bill rate of return = 4.5% Assume equilibrium, i.e. expected return = required return a. What is the expected rate of return and standard deviation for ABC? and XYZ? b. What is the expected rate of return, and standard deviation, and Beta for the portfolio if Steven's investment in XYZ is 50% more than his investment in ABC? Economy Boom Normal Bust XYZ Rate of Return 60% 0% Probability 0.30 0.50 0.20 Beta 40% 2.15 c. Given the answers to a and b, Steven should invest in ABC? or in XYZ? or in the portfolio consisting of ABC and XYZ? (Hint: It will be useful to find the coefficients of variation).
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Related Book For
Income Tax Fundamentals 2013
ISBN: 9781285586618
31st Edition
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill
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