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    Finance : Expected Return and Risk

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    Emery, Finnerty & Stowe - Ch. 6, problems A6, B6, & B10 (a only)-

    A6. (Expected portfolio return) Musumeci Capital Management has invested its portfolio as shown here. What is Musumeci's expected portfolio return?

    B6. (Expected return and risk) Procter & Gamble is considering three possible capital investment projects. The projected returns depend on the future state of the economy as given here.

    a. Calculate each project's expected return, variance, and standard deviation.

    b. Rank the projects on the basis of (1) expected return and (2) risk. Which project would you choose?

    B10. (Excel: Calculating means, standard deviations, covariance, and correlation) Given the probability distributions of returns for stock X and stock Y, compute:

    a. the expected return for each stock, x and y here

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    Emery, Finnerty & Stowe - Ch. 6, problems A6, B6, & B10 (a only)-

    A6. (Expected portfolio return) Musumeci Capital Management has invested its portfolio as shown here. What is Musumeci's expected portfolio return?

    Solution:

    Given that portfolio weight in Money Market securities = 10% = 0.1 and expected return = 4%

    Portfolio weight in corporate bond = 20% = 0.2 and expected return = 8%

    Portfolio weight in Equities = 70% = 0.7 and expected return = 12 %

    Expected ...

    Solution Summary

    Expected return and risk are calculated with full working shown.

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