# Business portfolio theory expected return

Not what you're looking for?

I am looking for some formulas to calculate with this chart , ones to suit these questions please make them easy to understand and a clear explanation of the formula, so I can do the math myself, especially C and D. maybe make up your own examples so I watch how it's done and learn from an example

(Portfolio returns and risk) There are four securities and five possible economic scenarios. The probability of occurrence and security returns are given below.

a) Calculate the expected return and standard deviation of returns for each security

b) Calculate the correlation coefficient for each pair of securities.

c) Assuming the four securities are weighted equally, calculate the expected return to the portfolio and the standard deviation of the return to the portfolio

D)Assuming 20% of the portfolio is invested in each of U.S. T-bills and government bonds and 30% is invested in each of corporate bonds and common stock, calculate the expected return to the portfolio and the standard deviation of the return to the portfolio

State of the Economy/Probability of Occurrence/U.S. T-Bills Government Bonds/Corporate Bonds/Common Stock

High growth 0.10 6.0% 8.0% 10.0% 25.0%

Moderate growth 0.25 6.0 7.5 9.0 15.5

Slow growth 0.35 6.0 7.0 8.5 11.5

Stagnation 0.15 6.0 6.0 6.0 −1.0

Recession 0.15 6.0 4.0 −2.0 −11.5

Â 1.00 Â Â Â Â

##### Purchase this Solution

##### Solution Summary

The business portfolio theory expected return is examined.

##### Solution Preview

ANSWERS

Please see attached file for answers.

Given

State of economy Probability of Occurence US T-Bills Government Bonds Corporate Bonds Common Stock

High growth 0.10 6.00% 8.00% 10.00% 25.00%

Moderate growth 0.25 6.00% 7.50% 9.00% 15.50%

Slow growth 0.35 6.00% 7.00% 8.50% 11.50%

Stagnation 0.15 6.00% 6.00% 6.00% -1.00%

Recession 0.15 6.00% 4.00% -2.00% -11.50%

a) Calculate the expected return and standard deviation of returns for each security

1. Compute the expected return of each security by multiplying the ...

##### Purchase this Solution

##### Free BrainMass Quizzes

##### Income Streams

In our ever changing world, developing secondary income streams is becoming more important. This quiz provides a brief overview of income sources.

##### Motivation

This tests some key elements of major motivation theories.

##### Balance Sheet

The Fundamental Classified Balance Sheet. What to know to make it easy.

##### Transformational Leadership

This quiz covers the topic of transformational leadership. Specifically, this quiz covers the theories proposed by James MacGregor Burns and Bernard Bass. Students familiar with transformational leadership should easily be able to answer the questions detailed below.

##### Learning Lean

This quiz will help you understand the basic concepts of Lean.