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can i please have all parts answered - Assume that you recently graduated with a major in finance and just landed a job in the
can i please have all parts answered
- Assume that you recently graduated with a major in finance and just landed a job in the trust department of a large regional expected to be distributed to the heirs in approximately one year, you have been instructed to plan for a one-year holding period. Furthermore, your boss has restricted you to the foliowing investment alternatves, shown with their probabilities and associated outcomes The bank's economic fotecasting staff has developed probability estimates for the state of the economy, and the rate of return on each alternative is estimated under each state of the economy. High Tech, Inc. is an electronics firm, Collections. Inc., a firm collects past-due debts and US Rubher manulactures tires and varinus ofhinr rubber and plastic products: - Given the situation as described, discuss the followng questions 1. Calculate the expected rate of return orreach alternative Which alternative has the highest return and which one has the lowest return? 2. Calculate the riskiness of each alfernative using the standard deviation of returns What type of risk does the standard deviation measure? 3. Calculale the coelficient of variations (CV/s) for the different securites and rank the alternatives based on the CVs: Does the CV measurement produce the same risk rankings as the standard deviation? 4. Suppose vou created a two-stock porttolio by investing $50,000 in High Tech and $50,000 in Collections Calculate the expected retum if , the standard deviation ( p ), and the coefficient of variation (CVp) for this portiolio How does the riskiness of this two-stock portfolio compare to the riskiness of the indridual stocks if they were held in isolation? 5 Suppose an investor starts with a portfotio consisting of one randomly selected stock. What would happen (1) to the riskiness and (2) to the expected retum of the portfolio as more randomly selected stocks are added to the portfolio? What is the implication for investors? Draw two graphs to illistrate your answer - Refer to the table below \begin{tabular}{|l|l|l|l|l|l} \hline & & \multicolumn{4}{|c}{ Estimated Returns on Altern } \\ \hline \begin{tabular}{l} State of \\ Economy \end{tabular} & Probability & \begin{tabular}{l} T- \\ Bills \end{tabular} & \begin{tabular}{l} High- \\ Tech \end{tabular} & Collections & \begin{tabular}{r} C \\ R \end{tabular} \\ \hline Recession & 0.1 & 8% & 22% & 28% & 1 \\ \hline \begin{tabular}{l} Below \\ Average \end{tabular} & 0.2 & 8 & -2 & 14.7 & - \\ \hline Average & 0.4 & 8 & 20 & 0 & 7 \\ \hline \begin{tabular}{l} Above \\ Average \end{tabular} & 0.2 & 8 & 35 & -10 & 4 \\ \hline Boom & 0.1 & 8 & 50 & -20 & 3 \\ \hline \end{tabular} \begin{tabular}{l|l|l|l|l|l|} \hline & \multicolumn{6}{|c|}{ Estimated Returns on Alternative Investments } \\ \hline Jability & \begin{tabular}{l} T- \\ Bills \end{tabular} & \begin{tabular}{l} High- \\ Tech \end{tabular} & Collections & \begin{tabular}{l} US \\ Rubber \end{tabular} & \begin{tabular}{l} Market \\ Portfolio \end{tabular} \\ \hline & 8% & 22% & 28% & 10% & 13% \\ \hline & 8 & -2 & 14.7 & -10 & 1 \\ \hline & 8 & 20 & 0 & 7 & 15 \\ \hline & 8 & 35 & -10 & 45 & 29 \\ \hline \end{tabular} Step by Step Solution
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