MidCap Growth and Energy are two portfolios constructed and managed by the Vanguard Group of mutual funds, comprised of stocks of middle sized U S companies and stocks of U S energy companies The accompanying table shows historical annualized return from the period 2001 to 2011, which suggest the e...

a A riskneutral investorsomeone who does not care about riskis interested only in the expected value ...

MidCap Growth and Energy are two portfolios constructed and managed by the Vanguard Group of mutual funds,

Question:

MidCap Growth and Energy are two portfolios constructed and managed by the Vanguard Group of mutual funds, comprised of of middle-sized U.S. companies and of U.S. energy companies. The accompanying table shows historical annualized return from the period 2001 to 2011, which suggest the expected value of the annual percentage returns associated with these portfolios.
Portfolio Expected value of return (percent)
MidCap Growth………………………. 5.32%
Energy…………………………………. 14.2
a. Which would a risk-neutral investor prefer?
b. Juan, a risk-averse investor, chooses to invest in the MidCap Growth can be inferred about the risk of the two portfolios from Juan's choice of investment? Based on historical performance, would a risk-neutral investor ever choose MidCap Growth?
c. Juan is aware that diversification can reduce risk. He considers a in which half his investment is in MidCap companies and the other half in Energy companies. What is the expected value of the return for this combined Would you expect this combined to be more risky or less risky than the MidCap Growth Why or why not?
Stocks
Stocks or shares are generally equity instruments that provide the largest source of raising funds in any public or private listed company's. The instruments are issued on a stock exchange from where a large number of general public who are willing... Portfolio
A portfolio is a grouping of financial assets such as stocks, bonds, commodities, currencies and cash equivalents, as well as their fund counterparts, including mutual, exchange-traded and closed funds. A portfolio can also consist of non-publicly...