Question
Sophia is considering setting up an investment portfolio. She has $10,000 cash on hand and would like to spend $3758 on Share A and the
Sophia is considering setting up an investment portfolio. She has $10,000 cash on hand and would like to spend $3758 on Share A and the remaining on Bond B. The market price for the share today is $29. She also has the following expectation on the share price and bond return in 6 months time. Assume no coupon or dividend is received during the period of holding.
Probability | Share A Price | Bond B Return |
60% | $35 | -2% |
40% | $25 | 5% |
- Sophia wants to use the below formula to calculate the expected return of Share A.
Calculate the following variables in the formula above.
Round your answer to the nearest 0.01% (2dp). Do not include the % symbol. Do not use comma separators. For example, if your answer in decimal is 0.123456, 12.35 would be the correct format.
R1=Answer% (1 mark)
R2=Answer% (1 mark)
- Calculate the expected return of Bond B.
Round your answer to the nearest 0.01% (2dp). Do not include the % symbol. Do not use comma separators. For example, if your answer in decimal is 0.123456, 12.35 would be the correct format.
E(R)Bond B=Answer% (1 mark)
- Sophia wants to use the below formula to calculate the expected return of her portfolio.
Calculate the following variables in the formula above.
Round your answer to the nearest 0.01% (2dp). Do not include the % symbol. Do not use comma separators. For example, if your answer in decimal is 0.123456, 12.35 would be the correct format.
x1=Answer% (1 mark)
x2=Answer% (1 mark)
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