Question
Suppose that Peter created his investment portfolio allocating 60% of his funds in Facebook (Meta Platforms Inc) shares and 40% in General Electric Co shares.
Suppose that Peter created his investment portfolio allocating 60% of his funds in Facebook (Meta Platforms Inc) shares and 40% in General Electric Co shares.
The average annual return rate on a Facebook stock is 0.39 and the variance of the returns on the stock is 0.16. A General Electric stock has an average return rate of 0.09 per year and a variance of 0.07.
a) Denote the annual return rate on Facebook shares by X and the annual return rate on General Electric shares by Y and use them to express the rate of return on Peter's portfolio.
rate of return on Peter's portfolio=Answer
b) Find the expected value of the rate of return on Peter's portfolio.
expected value of the return (enter with three decimal points): Answer
c) Find a standard deviation of the rate of return on Peter's portfolio (assume that the stock returns of companies are independent).
standard deviation of the return
Step by Step Solution
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a The rate of return on Peters portfolio can be expressed as a weighted average of the individual ra...Get Instant Access to Expert-Tailored Solutions
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