1. Marvin has investments with the following characteristics in his portfolio:

Expected Investment                       rM                                           rS
         abc                                          30%                                         10k
         efg                                           16%                                         50k
         qrp                                           20%                                         40k

What is the expected return of Marvin’s portfolio of investments?

2.  

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EXPECTED RETURNS Stocks X and Y have the following probability distributions of expected future returns: Probability X Y (10%) (35%) 0.1 0.2 2 0.4 12 20 0.2 20 25 0.1 38 45 a. Calculate the expected rate of return, fy, for Stock Y ( fx = 12%). b. Calculate the standard deviation of expected returns, ox, for Stock X (oy = 20.35%). Now calculate the coefficient of variation for Stock Y. Is it possible that most investors will regard Stock Y as being less risky than Stock X? Explain. EXPECTED RETURNS Stocks X and Y have the following probability distributions of expected future returns: Probability X Y (10%) (35%) 0.1 0.2 2 0.4 12 20 0.2 20 25 0.1 38 45 a. Calculate the expected rate of return, fy, for Stock Y ( fx = 12%). b. Calculate the standard deviation of expected returns, ox, for Stock X (oy = 20.35%). Now calculate the coefficient of variation for Stock Y. Is it possible that most investors will regard Stock Y as being less risky than Stock X? Explain.

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