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Problem 11-35 Covariance and Portfolio Standard Deviation There are three securities in the market. The following chart shows their possible payoffs: State Probability of Outcome

Problem 11-35 Covariance and Portfolio Standard Deviation

There are three securities in the market. The following chart shows their possible payoffs:

State Probability of Outcome Return on Security 1 Return on Security 2 Return on Security 3
1 .16 .210 .210 .060
2 .34 .160 .110 .110
3 .34 .110 .160 .160
4 .16 .060 .060 .210

a-1.

What is the expected return of each security? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places (e.g., 32.16).)

Expected return
Security 1 %
Security 2 %
Security 3 %

a-2.

What is the standard deviation of each security? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places (e.g., 32.16).)

Standard deviation
Security 1 %
Security 2 %
Security 3 %

b-1.

What are the covariances between the pairs of securities? (Negative amount should be indicated by a minus sign. Do not round intermediate calculations and round your final answers to 5 decimal places (e.g., 32.16161).)

Covariance
Security 1 & 2
Security 1 & 3
Security 2 & 3

b-2.

What are the correlations between the pairs of securities? (Negative amount should be indicated by a minus sign. Do not round intermediate calculations and round your final answers to 4 decimal places (e.g., 32.1616).)

Correlation
Security 1 & 2
Security 1 & 3
Security 2 & 3

c-1.

What is the expected return of a portfolio with half of its funds invested in Security 1 and half in Security 2? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places (e.g., 32.16).)

Expected return
Security 1 & 2 %

c-2.

What is the standard deviation of a portfolio with half of its funds invested in Security 1 and half in Security 2? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places (e.g., 32.16).)

Standard deviation
Security 1 & 2 %

d-1.

What is the expected return of a portfolio with half of its funds invested in Security 1 and half in Security 3? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places (e.g., 32.16).)

Expected return
Security 1 & 3 %

d-2.

What is the standard deviation of a portfolio with half of its funds invested in Security 1 and half in Security 3? (Leave no cells blank - be certain to enter "0" wherever required. Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places (e.g., 32.16).))

Standard deviation
Security 1 & 3 %

e-1.

What is the expected return of a portfolio with half of its funds invested in Security 2 and half in Security 3? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places (e.g., 32.16).)

Expected return
Security 2 & 3 %

e-2.

What is the standard deviation of a portfolio with half of its funds invested in Security 2 and half in Security 3? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places (e.g., 32.16).)

Standard deviation
Security 2 & 3 %

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