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AnnZ [28]
3 years ago
8

Your portfolio is invested 30 percent each in Stocks A and C, and 40 percent in Stock B. What is the standard deviation of your

portfolio given the following information?
Rate of Return if State Occurs
State of Economy Probability of State of Economy Stock A Stock B Stock C
Boom 0.15 0.31 0.41 0.21
Good 0.60 0.16 0.12 0.10
Poor 0.20 -0.03 -0.06 -0.04
Bust 0.05 -0.11 -0.16 -0.08
Business
1 answer:
Assoli18 [71]3 years ago
5 0

Answer:

portfolio's standard deviation = 6.18%

Explanation:

we must first determine the expected returns for each stock:

stock A = (0.15 x 31%) + (0.6 x 16%) + (0.2 x -3%) + (0.05 x -11%) = 13.1%

stock B = (0.15 x 41%) + (0.6 x 12%) + (0.2 x -6%) + (0.05 x -16%) = 11.35%

stock C = (0.15 x 21%) + (0.6 x 10%) + (0.2 x -4%) + (0.05 x -8%) = 7.95%

then we must determine the variance of each stock's return:

stock A = {[0.15 x (31 - 13.1)²] + [0.6 x (16 - 13.1)²] + [0.2 x (-3- 13.1)²] + [0.05 x (-11 - 13.1)²]} / 4 = (48.0615 + 5.046 + 51.842 + 29.0405) / 4 = 33.4975

stock B = {[0.15 x (41 - 11.35)²] + [0.6 x (12 - 11.35)²] + [0.2 x (-6- 11.35)²] + [0.05 x (-16 - 11.35)²]} / 4 = (131.868375 + 0.2535 + 60.2045 + 37.401125) / 4 = 57.4219

stock C = {[0.15 x (21 - 7.95)²] + [0.6 x (10 - 7.95)²] + [0.2 x (-4- 7.95)²] + [0.05 x (-8 - 7.95)²]} / 4 = (25.545375 + 2.5215 + 28.5605 + 12.720125) / 4 = 17.3369

portfolio's variance = (0.3 x 33.4975) + (0.4 x 57.4219) + (0.3 x 17.3369) = 38.21908

portfolio's standard deviation = √38.21908 = 6.18%

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Answer:

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Because fish and poultry are subsituites goods, if the price of poultry increases, the demand for fish would increase.

I hope my answer helps you.

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3 years ago
You are asked to recommend whether a firm should make or purchase product A. The following are data concerning the two options.
Alexxandr [17]

Answer:

Instructions are listed below

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Giving the following information:

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For the make​ option:

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The firm also has to hire five operators to help make product A. Each operator works eight hours per​ day, five days per week at the rate of ​$14 per hour.

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3 0
3 years ago
Burger Prince buys top-grade ground beef for $1.00 per pound. A large sign over the entrance guarantees that the meat is fresh d
Gnoma [55]

Answer:

The optimal order quantity is 316 pounds

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In order to calculate What daily order quantity is optimal, we have to calculate first The cost of underestimating the demand Cu and cost of overestimating demand Co

Cu = ($0.60 - $0.50)*4 = $0.40

Co = $1 - $0.80 = $0.20

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