Problem 1

You know with asset X you have to make an investment of $260 and will give you $150 with probability 0.15, $210 with probability 0.25, $350 with probability 0.45, and $400 with probability 0.15. Calculate the expected rate of return and the standard deviation of the rate of return.

A. 10.50%; 0.14 B. 11.50%; 0.24 C. 12.50%; 0.34 D. 13.50%; 0.44 E. 14.50%; 0.54 

Problem 2

An investor knows that assets X and Y dont have risk (are risk-free assets). She knows also that rX=5% and rY=3%. If we know she can invest only in X or only in Y, but not in both, what is the correct statement?

A. She will invest only in Y. B. She will invest only in X. C. It is the same for her to invest in X or in Y. D. She will not invest her money in X nor in Y. E. Without knowing the investor's preferences, we

better.

Problem 3

cannot state which is 

An investor knows that assets X and Y both have the same risk (Var(rX)=Var(rY)=4), but X has higher return (rX=5% and rY=3%). If we know she can invest only in X or only in Y, but not in both, what is the correct statement?

A. She will invest only in Y. B. She will invest only in X. C. It is the same for her to invest in X or in Y. D. She will not invest her money in X nor in Y. E. Without knowing the investor's preferences, we cannot state which is

better.

Problem 4

An investor knows the following about assets X and Y: E[rX]=0, Var(rX)=0.9, E[rY]=0.05, Var(rY)=0. If we know she can invest only in X or only in Y, but not in both, what is the correct statement?

A. She will invest only in Y. B. She will invest only in X. C. It is the same for her to invest in X or in Y.

D She will not invest her money in X nor in Y.

E Without knowing the investor's preferences, we cannot state which is

better.