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considering setting up an investment portfolio. She has $10,000 cash on hand and would like to spend $3758 on Share A and the remaining on
considering setting up an investment portfolio. She has $10,000 cash on hand and would like to spend $3758 on Share A and the remaining on Bond B. The market price for the share today is $29. She also has the following expectation on the share price and bond return in 6 months time. Assume no coupon or dividend is received during the period of holding.
Sophia is considering setting up an investment portfolio. She has $10,000 cash on hand and would like to spend $3758 on Share A and the remaining on Bond B. The market price for the share today is $29. She also has the following expectation on the share price and bond return in 6 months' time. Assume no coupon or dividend is received during the period of holding. Probability Share A Price Bond B Return 60% $35 -2% 40% $25 5% 1. Sophia wants to use the below formula to calculate the expected return of Share A. E(R)Share = 60% + R1 + 40% * R2 Calculate the following variables in the formula above. Round your answer to the nearest 0.01% (2dp). Do not include the % symbol. Do not use comma separators. For example, if your answer in decimal is 0.123456, 12.35 would be the correct format. R1 = % (1 mark) R2= % (1 mark) 2. Calculate the expected return of Bond B. Round your answer to the nearest 0.01% (20p). Do not include the % symbol. Do not use comma separators. For example, if your answer in decimal is 0.123456, 12.35 would be the correct format. E(R)Bond B= % (1 mark) 3. Sophia wants to use the below formula to calculate the expected return of her portfolio. E(R) Portfolio = x1 *E(R)Share A + x2 *E(R)Bond B Calculate the following variables in the formula above. Round your answer to the nearest 0.01% (2dp). Do not include the % symbol. Do not use comma separators. For example, if your answer in decimal is 0.123456, 12.35 would be the correct format. X1= % (1 mark) X2= % (1 mark)
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