Question
States Probability Asset M Return Asset N Return Asset O Return Boom 32% 13% 23% 5% Normal 45% 11% 15% 11% Recession 23% 5% 3%
States | Probability | Asset M Return | Asset N Return | Asset O Return |
| |||||
Boom | 32% | 13% | 23% | 5% | ||||||
Normal | 45% | 11% | 15% | 11% | ||||||
Recession | 23% | 5% | 3% | 13% |
a. What is the expected return of investing equally in all three assets M, N, and O?
- what is the expected return of investing in asset M alone?
- what is the standard deviation of the portfolio that invests equally in all three assets M, N, and O?
- what is the standard deviation of asset M?
- by investing in the portfolio that invests equally in all three assets M, N, and O rather than asset M alone, Sally can benefit by increasing her return by ___% and decrease her risk by ___%. (Round to 2 decimal places)
b. What is the expected return of a portfolio of 50% asset M and 50% asset N?
- what is the expected return of a portfolio 50% asset M and 50% asset O?
- what is the expected return of a portfolio 50% asset N and 50% asset O?
- what is the standard deviation of a portfolio of 50% asset M and 50% asset N?
- what is the standard deviation of a portfolio of 50% asset M and 50% asset O?
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