Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

You bought shares of stock from Tesla, Target, and Toyota. You feel like every year in the future will be randomly either spectacular or depressing.

You bought shares of stock from Tesla, Target, and Toyota. You feel like every year in the future will be randomly either "spectacular" or "depressing".

Rate of Return if State Occurs
State of Economy Probability of State of Economy Stock of Tesla Stock of Target Stock of Toyota
Spectacular 0.74 0.25 0.33 0.27
Depressing 0.26 0.13 0.11 0.09

Requirement 1:

If you bought an equally weighted portfolio of Tesla, Target, and Toyota shares, what return would you expect to receive every year on your stock investment?

Requirement 2:

What do you expect the variance of your portfolio returns to be, if you invested 20 percent of your money in Tesla's shares, same proportion in Target's shares, and 60 percent in Toyota's shares?

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Financial Management For Public Health And Not For Profit Organizations

Authors: Steven A. Finkler

4th International Edition

0132912813, 9780132912815

More Books

Students also viewed these Finance questions

Question

In what context did the study and teaching of communication begin?

Answered: 1 week ago