Three assets, X, Y, and Z are currently being considered by Smith Investors. The probability distributions...
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Three assets, X, Y, and Z are currently being considered by Smith Investors. The probability distributions of the expected returns are shown below: Outcome 1 2 3 4 5 1. 2. 3. 4. Asset X Probability % 10 22 41 22 5 Return% 40 10 0 -5 -10 Asset Y Probability Return% % 45 28 27 35 10 -20 Asset Z Probability Return% % 12 18 38 20 12 40 20 10 0 -20 Calculate the expected value for return of each asset. Which provides the largest expected return? [4] Calculate the standard deviation for each asset. Which appears to have the largest risk? [6] Calculate the coefficient of variation for each asset. Which appears to have the largest relative risk? [4] Which of the assets would you recommend? Explain your answer. [2] Three assets, X, Y, and Z are currently being considered by Smith Investors. The probability distributions of the expected returns are shown below: Outcome 1 2 3 4 5 1. 2. 3. 4. Asset X Probability % 10 22 41 22 5 Return% 40 10 0 -5 -10 Asset Y Probability Return% % 45 28 27 35 10 -20 Asset Z Probability Return% % 12 18 38 20 12 40 20 10 0 -20 Calculate the expected value for return of each asset. Which provides the largest expected return? [4] Calculate the standard deviation for each asset. Which appears to have the largest risk? [6] Calculate the coefficient of variation for each asset. Which appears to have the largest relative risk? [4] Which of the assets would you recommend? Explain your answer. [2]
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Answer rating: 100% (QA)
To calculate the expected value for return of each asset we multiply each return by its corresponding probability and sum the results 1 Expected value for return For Asset X Expected return 10 x 04 12 ... View the full answer
Related Book For
Algebra And Trigonometry Graphs And Models
ISBN: 9780134179049
6th Edition
Authors: Marvin Bittinger, Judith Beecher, David Ellenbogen, Judith Penna
Posted Date:
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