Question
I NEED HELP ASAP !!!! a) Kate has purchased a companys ordinary share today for $16 each. Her estimation on possible states of the economy
I NEED HELP ASAP !!!!
a) Kate has purchased a companys ordinary share today for $16 each. Her estimation on possible states of the economy and share prices is provided below. State of Economy Probability Price Boom 35% $25 Normal 45% $18 Recession 20% $11 Calculate the expected return of this share. Round your answer to the nearest cent. (2 marks). b) Answer parts i, ii and iii based on the information below: An investment portfolio consists of a share and a bond. The return on each asset according to the state of economy is provided below: State of economy Probability Return on Share Return on Bond Boom 30% 10% 2% Normal 60% 8% 7% Recession 10% -5% 5% i. Calculate the expected return for the share and the bond. Round your answer to the nearest 0.01%. (2 marks) ii. Calculate the standard deviation for the share and the bond. Round your answer to the nearest 0.01%. (4 marks) iii. Calculate the expected return of the portfolio if you allocate 40% of investment into share and the remaining into bond. Round your answer to the nearest 0.01%. (2 marks)
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