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DanielleElmas [232]
3 years ago
5

Suppose stocks offer an expected rate of returns of 10% with a standard deviation of 20%, and gold offers an expected return of

5% with a standard deviation of 25%. (i) If the correlation between gold and stocks is sufficiently low, gold ______ be held as a component in the optimal portfolio. (ii) If the correlation coefficient between gold and stocks is 1.0, then gold ______ be held as a component in the optimal portfolio.
Business
1 answer:
FinnZ [79.3K]3 years ago
4 0

Answer: A)  (i) will; (ii) will not

Explanation:

The optimal portfolio should be one where the assets are diversified such that returns can be made regardless of the direction the economy is going. For this to happen, asset classes need to have a low correlation with one another.

If the correlation between gold and stocks is low therefore, gold should and will be held as a component in the portfolio. If the correlation between gold and stocks is 1.0 - this means that they are perfectly correlated and move together - gold should not be in the optimal portfolio as it would be too risky.

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Which of these statements is true?
olasank [31]

Answer:

Compound interest will lead to a larger sum of money than a comparable simple interest payment.

Explanation:

The true statement is that compound interest will lead to a larger sum of money than a comparable simple interest payment because the interest are compounded for a certain number of times such as daily, weekly, quarterly or annually while simple interest isn't compounded at all.

To find the future value, we use the compound interest formula;

A = P(1 + \frac{r}{n})^{nt}

Where;

A is the future value.

P is the principal or starting amount.

r is annual interest rate.

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t is the number of years for the compound interest.

Mathematically, simple interest is calculated using this formula;

S.I = \frac {PRT}{100}

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6 0
3 years ago
Veltri Corporation is working on its direct labor budget for the next two months. Each unit of output requires 0.77 direct labor
olasank [31]

Answer:

Total direct labor cost= $122,752

Explanation:

Giving the following information:

Each unit of output requires 0.77 direct labor-hours.

The direct labor rate is $11.20 per direct labor-hour.

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October= 7,100 units

November= 6,900 units

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Total cost= $122,752

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Answer:

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When Ashton Woods profiles households based on the income they earn, he is doing demographic segmentation

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When Ashton Woods determines that homeowners would want like a beautiful upscale home, without the cost of maintaining a large yard. He is segmenting based on  Psychography

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