Purchase Solution

Expected return and standard deviation

Not what you're looking for?

Ask Custom Question

Problem 1 (Chapter 13) Please use the following information to answer the following questions.

State Probability Return on A Return on B
Boom .65 0.30 0.05
Bust .35 0.10 0.20

What is the expected return for security A? __________________

What is the expected return for security B? __________________

What is the expected return for a portfolio that is 70% invested in A and 30% invested in B? __________

What is the standard deviation of security A? __________________

What is the standard deviation of security B? __________________

What is the standard deviation of a portfolio with one-quarter of the funds in A and the remainder of the funds in B? __________________

Purchase this Solution

Solution Summary

The solution explains how to calculate the expected return and standard deviation for individual securities and for a portfolio

Solution Preview

State Probability Return on A Return on B
Boom .65 0.30 0.05
Bust .35 0.10 0.20

What is the expected return for security A? __________________

Expected return = Sum (Probability X return)
= 0.65X0.3 + 0.35X0.1 = 23%

What is the expected return for security B? __________________

Expected return = ...

Purchase this Solution


Free BrainMass Quizzes
Lean your Process

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

Production and cost theory

Understanding production and cost phenomena will permit firms to make wise decisions concerning output volume.

MS Word 2010-Tricky Features

These questions are based on features of the previous word versions that were easy to figure out, but now seem more hidden to me.

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.

Team Development Strategies

This quiz will assess your knowledge of team-building processes, learning styles, and leadership methods. Team development is essential to creating and maintaining high performing teams.