16 & 17

16. a & B

17. a & b

16. Scenario Analysis. The common stock of Escapist Films sells for $25 a share and offers the following payoffs next year: ( LO113 ) a. Calculate the expected return and standard deviation of Escapist. All three scenarios are equally likely. b. Now calculate the expected return and standard deviation of a portfolio half invested in Escapist and half in Leaning Tower of Pita (from Problem 15). Show that the portfolio standard deviation is lower than that of either stock. Explain why this happens. 7. Average Return and Standard Deviation. In a recent five-year period, mutual fund manager Diana Sauros produced the following percentage rates of return for the Mesozoic Fund. Rates of return on the market index are given for comparison. Calculate (a) the average return on both the fund and the index and (b) the standard deviation of the returns on each. Did Ms. Sauros do better or worse than the market index on these measures? ( LO11-3) 16. Scenario Analysis. The common stock of Escapist Films sells for $25 a share and offers the following payoffs next year: ( LO11-3) a. Calculate the expected return and standard deviation of Escapist. All three scenarios are equally likely. b. Now calculate the expected return and standard deviation of a portfolio half invested in Escapist and half in Leaning Tower of Pita (from Problem 15). Show that the portfolio standard deviation is lower than that of either stock. Explain why this happens. 7. Average Return and Standard Deviation. In a recent five-year period, mutual fund manager Diana Sauros produced the following percentage rates of return for the Mesozoic Fund. Rates of return on the market index are given for comparison. Calculate (a) the average return on both the fund and the index and (b) the standard deviation of the returns on each. Did Ms. Sauros do better or worse than the market index on these measures? ( LO11-3)