Mini Case Chapter 5 Assume that you recently graduated and you just landed a job as a financial planner with the Cleveland Clinic Your first assignment is to invest $100,000 Because the funds are to be invested at the end of one year, you have been instructed to plan for a one year holding period Further, your boss has restricted you to the following investment alternatives, shown with their probabilities and associated outcomes State of Economy Probability T Bills Alta Inds Repo Men American Foam Market Port Recession 0 1 8 00 22 0 28 0 10 0 13 0 Below Average 0 2 8 00 2 0 14 7 10 0 1 0 Average 0 4 8 00 20 0 0 0 7 0 15 0 Above Average 0 2 8 00 35 0 10 0 45 0 29 0 Boom 0 1 8 00 50 0 20 0 30 0 43 0 Barney Smith Investment Advisors recently issued estimates for the state of the economy and the rate of return on each state of the economy Alta Industries, Inc is an electronics firm Repo Men Inc collects past due debts and American Foam manufactures mattresses and various other foam products Barney Smith also maintains an index fund which owns a market weighted fraction of all publicly traded stocks you can invest in that fund and thus obtain average stock market results Suppose you create a two stock portfolio by investing $50,000 in Alta Industries and $50,000 in Repo Men Calculate the expected return, standard deviation, coefficient of variation, and beta for this portfolio

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Mini Case Chapter 5 Assume that you recently graduated and you just landed a job as a financial planner with the Cleveland Clinic. Your first

Mini Case Chapter 5

Assume that you recently graduated and you just landed a job as a financial planner with the Cleveland Clinic. Your first assignment is to invest $100,000. Because the funds are to be invested at the end of one year, you have been instructed to plan for a one-year holding period. Further, your boss has restricted you to the following investment alternatives, shown with their probabilities and associated outcomes.

State of Economy	Probability	T-Bills	Alta Inds.	Repo Men	American Foam	Market Port.
Recession	0.1	8.00%	-22.0%	28.0%	10.0%	-13.0%
Below Average	0.2	8.00%	-2.0%	14.7%	-10.0%	1.0%
Average	0.4	8.00%	20.0%	0.0%	7.0%	15.0%
Above Average	0.2	8.00%	35.0%	-10.0%	45.0%	29.0%
Boom	0.1	8.00%	50.0%	-20.0%	30.0%	43.0%

Barney Smith Investment Advisors recently issued estimates for the state of the economy and the rate of return on each state of the economy. Alta Industries, Inc. is an electronics firm; Repo Men Inc. collects past due debts; and American Foam manufactures mattresses and various other foam products. Barney Smith also maintains an "index fund" which owns a market-weighted fraction of all publicly traded stocks; you can invest in that fund and thus obtain average stock market results. Suppose you create a two-stock portfolio by investing $50,000 in Alta Industries and $50,000 in Repo Men. Calculate the expected return, standard deviation, coefficient of variation, and beta for this portfolio.