Question
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
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 | .15 | .195 | .195 | .045 |
2 | .35 | .145 | .095 | .095 |
3 | .35 | .095 | .145 | .145 |
4 | .15 | .045 | .045 | .195 |
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? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your 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? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your 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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