this is for class fin 3403!! THERE IS A LOT OF PHOTOS SO YOU MAY SEE EACH PART. ALL OF THEM EQUAL ONE QUESTION

Ch 08: Assignment - Risk and Rates of Return Back to Assignment Attempts Average/2 2. Statistical measures of stand-alone risk Remember, the expected value of a probability distribution is a statistical measure of the average (mean) value expected to occur during all possible circumstances. To compute an asset's expected return under a range of possible circumstances (or states of nature), multiply the anticipated return expected to result during each state of nature by its probability of occurrence. Consider the following case: Juan owns two-stock portfolio that invests in Blue Llama Mining Company (BLM) and Hungry Whale Electronics (HWE). Three-quarters of Juan's portfolio value consists of BLM's shares, and the balance consists of HWE's shares. Each stock's expected return for the next year will depend on forecasted market conditions. The expected returns from the stocks in different market conditions are detailed in the following table: Market Condition Hungry Whale Electronics Probability of Occurrence 0.20 Blue Llama Mining 20% Strong 28% Normal 0.35 12% 16% Weak 0.45 -16% -20% Calculate expected returns for the individual stocks in Juan's portfolio as well as the expected rate of return of the entire portfolio over the three possible market conditions next year. The expected rate of return on Blue Llama Mining's stock over the next year is The expected rate of return on Hungry Whale Electronics's stock over the next year is The expected rate of return on Juan's portfolio over the next year is Calculate expected returns for the individual stocks in Juan's portfolio as well as the expected rate of return of the entire portfolio over the three possible market conditions next year. 0.85% The expected rate of return on Blue Llama Mining's stock over the next year is The expected rate of return on Hungry Whale Electronics's stock over the next The expected rate of return on Juan's portfolio over the next year is 1.35% The expected returns for Juan's portfolio were calculated based on three possible in the market. Such conditions will vary from time to time, and for each condition there will be a specific outcome. These probabilities and ou en be represented in the form of a continuous probability distribution graph. 1.20% 1.00% For example, the continuous probability distributions of rates of return on stocks for two different companies are shown on the following graph: Calculate expected returns for the individual stocks in Juan's portfolio as well as the expected rate of return of the entire portfolio over the three possible market conditions next year. The expected rate of return on Blue Llama Mining's stock over the next year is The expected rate of return on Hungry Whale Electronics's stock over the next year is The expected rate of return on Juan's portfolio over the next year is 2.20% The expected returns for Juan's portfolio were calculated based on three possible conditid 2.49% market. Such conditions will vary from time to time, and for each condition there will be a specific outcome. These probabilities and outcomes presented in the form of a continuous probability 1.43% distribution graph. 2.73% For example, the continuous probability distributions of rates of return on stocks for two companies are shown on the following graph: PROBABILITY DENSITY Calculate expected returns for the individual stocks in Juan's portfolio as well as the expected rate of return of the entire portfolio over the three possible market conditions next year. The expected rate of return on Blue Llama Mining's stock over the next year is The expected rate of return on Hungry Whale Electronics's stock over the next year is The expected rate of return on Juan's portfolio over the next year is The expected returns for Juan's portfolio were calculated based on thre 1.76% conditions in the market. Such conditions will vary from time to time, and for each condition there will be a specific outcome. These probabili 1.30% utcomes can be represented in the form of a continuous probability distribution graph. 1.11% For example, the continuous probability distributions of rates of return for two different companies are shown on the following graph: 1.56% Calculate expected returns for the individual stocks in Juan's portfolio as well as the expected rate of return of the entire portfolio over the three possible market conditions next year. The expected rate of return on Blue Llama Mining's stock over the next year is The expected rate of return on Hungry Whale Electronics's stock over the next year is . The expected rate of return on Juan's portfolio over the next year is Y. The expected returns for Juan's portfolio were calculated based on three possible conditions in the market. Such conditions will vary from time to time, and for each condition there will be a specific outcome. These probabilities and outcomes can be represented in the form of a continuous probability distribution graph. For example, the continuous probability distributions of rates of return on stocks for two different companies are shown on the following graph: PROBABILITY DENSITY Company A Company B -40 -20 0 20 40 60 RATE OF RETURN (Percent) Based on the graph's information, which of the following statements is true? O Company A has a tighter probability distribution. Company B has a tighter probability distribution. Grado It Now Sam Continuin