Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

You have the following information on the expected performance of three companies in the next year: Boom Stable Recessione Loki Puzzles and 15% 7.5% -10%

image text in transcribed
You have the following information on the expected performance of three companies in the next year: Boom Stable Recessione Loki Puzzles and 15% 7.5% -10% Games Freya Cosmetics 12%e 6% -1% Aegir Breweries 12% 6% 1% Economists think there is a 25% probability of a boom, a 50% probability of a stable economy and a 25% probability of a recession. a) Calculate the expected return for each of the three companies -2 Click here to enter text. (2 Marks) b) Calculate the standard deviation for each of the three companies Click here to enter text. (3 Marks) c) Based on the expected return and standard deviation, identify which company we should definitely NOT invest in if we were to invest in just one company. Justify your answer. Click here to enter text. (2 Marks) d) You have opted to build a portfolio that is 40% Loki Puzzles and Games and 60% Aegir Breweries. If these two companies have a correlation coefficient of -0.2, what is the expected portfolio return and standard deviation? Click here to enter text

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

Step: 3

blur-text-image

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

Fundamentals Of Financial Management

Authors: Eugene F. Brigham, Joel F. Houston

Concise 10th Edition

1337902578, 978-1337902571

More Books

Students also viewed these Finance questions

Question

=+Part 1 What kind of client could use vernacular in the campaign?

Answered: 1 week ago