Question
Expected return and standard deviation. Use the following information to answer the questions. State of Economy Probability of State Return on Asset J in State
Expected return and standard deviation.
Use the following information to answer the questions.
State of Economy | Probability of State | Return on Asset J in State | Return on Asset K in State | Return on Asset L in State |
| |||||
Boom | 0.29 | 0.070 | 0.230 | 0.3 | ||||||
Growth | 0.37 | 0.070 | 0.130 | 0.190 | ||||||
Stagnant | 0.25 | 0.070 | 0.040 | 0.090 | ||||||
Recession | 0.09 | 0.070 | 0.050 | 0.200 |
a. What is the expected return of each asset?
b. What is the variance and the standard deviation of each asset?
c. What is the expected return of a portfolio with
88 %
in asset J,
4545 %
in asset K, and
4747 %
in asset L?
d. What is the portfolio's variance and standard deviation using the same asset weights from part
(c )?
a. What is the expected return of asset J?
_____
(Round to four decimal places.)
What is the expected return of asset K?
-------
(Round to four decimal places.)
What is the expected return of asset L?
---------
(Round to four decimal places.)
b. What is the variance of asset J?
--------
(Round to four decimal places.)
What is the variance of asset K?
---------
(Round to four decimal places.)
What is the variance of asset L?
--------
(Round to four decimal places.)
What is the standard deviation of asset J?
------
(Round to four decimal places.)
What is the standard deviation of asset K?
------
(Round to four decimal places.)
What is the standard deviation of asset L?
-------
(Round to four decimal places.)
d. What is the portfolio's variance using the same asset weights from part
(c )____
(Round to four decimal places.
What is the portfolio's standard using the same asset weights from part
(c )?
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