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3 years ago

A company has an unbiased forecast for its demand. what does that mean?

1 answer:

8 0

Average of all forecast errors is 0 a company wants to use a regression analysis to forecasts the demand for the next quarter.

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The (annual) expected return and standard deviation of returns for 2 assets are as follows: Asset A Asset B E[r] 10% 20% SD[r] 3

polet [3.4K]

Answer:

Part A

(i) Weight(A) = 0.80 , Weight(B) = 0.20

ER(portfolio) = { ER(A) * Weight(A) } + { ER(B) * Weight(B) }

= { 10 * 0.80 } + { 20 * 0.20 }

= 12%

SD(portfolio) = { SD(A)^2 * W(A)^2 + SD(B)^2 * W(B)^2 + 2*SD(A) * SD(B) * W(A) * W(B) * CORR }^1/2

= { 900*0.64 + 2500*0.04 + 2*30*50*0.8*0.2*0.15}^1/2

= {748}^1/2

= 27.35%

(ii) Weight(A) = 0.50 , Weight(B) = 0.50

ER(portfolio) = { ER(A) * Weight(A) } + { ER(B) * Weight(B) }

= { 10 * 0.50 } + { 20 * 0.50 }

= 15%

SD(portfolio) = { SD(A)^2 * W(A)^2 + SD(B)^2 * W(B)^2 + 2*SD(A) * SD(B) * W(A) * W(B) * CORR }^1/2

= { 900*0.25 + 2500*0.25 + 2*30*50*0.5*0.5*0.15}^1/2

= {917.5}^1/2

= 30.29 %

(iii) Weight(A) = 0.20 , Weight(B) = 0.80

ER(portfolio) = { ER(A) * Weight(A) } + { ER(B) * Weight(B) }

= { 10 * 0.20 } + { 20 * 0.80 }

= 18 %

SD(portfolio) = { SD(A)^2 * W(A)^2 + SD(B)^2 * W(B)^2 + 2*SD(A) * SD(B) * W(A) * W(B) * CORR }^1/2

= { 900*0.04 + 2500*0.64 + 2*30*50*0.2*0.8*0.15}^1/2

= {1708}^1/2

= 41.33 %

Part B

Let Weight(A) be x, and Weight(B) be (1-x)

Solving the ER(portfolio) Equation :

ER(portfolio) = { ER(A) * Weight(A) } + { ER(B) * Weight(B) }

25 = {10 * x } + {20 * (1 - x) }

25 = 10x + 20 - 20x

25 - 20 = -10x

x = - 0.5

Weight (A) = - 0.5 {its Negative which means Short Selling of Stock A}

Weight (B) = 1 - (-0.5) = 1.5

Cross-Proof

ER (portfolio) = { ER(A) * Weight(A) } + { ER(B) * Weight(B) }

= { 10 * -0.5 } + { 20 * 1.5 }

= { - 5 } + { 30 }

= 25% . Therefore, our Weights are Correct

Calculation of SD (portfolio)

SD(portfolio) = { SD(A)^2 * W(A)^2 + SD(B)^2 * W(B)^2 + 2*SD(A) * SD(B) * W(A) * W(B) * CORR }^1/2

= { 900*0.25 + 2500*2.25 + 2*30*50*-0.5*1.5*0.15}^1/2

= { 225 + 5625 - 337.5 }^1/2

= {5512.5}1/2

= 74.2 %

3 0

4 years ago

the trasportation costs involved in getting a product to a cosumer after the product has been made are 1. transaction costs 2.co

Elena-2011 [213]

The right answer for the question that is being asked and shown above is that: " 4.independent costs." The trasportation costs involved in getting a product to a cosumer after the product has been made are 4.independent costs

3 0

3 years ago

The range rule of thumb roughly estimates the standard deviation of a data set as _______.

goblinko [34]

Range is the measure of variation that is very sensitive to extreme values. It is the difference between high and low values, while standard deviation is the standard measure of variation.The range rule of thumb roughly estimates the standard deviation of a data set as s=range/4 , where s stands for standard deviation and
range = Maximum - Minimum

5 0

3 years ago

An investor has sold 1 ABC Jan 50 Call and has bought 1 ABC Apr 60 Call. This is a:________.

Kitty [74]

Answer:

diagonal spread

Explanation:

Spread is basically a sale and purchase of a call. So here the the types of spreads determine the relationship between the strike price and the expiration dates of all options involved in the trade.

In this example investor has sold 1 ABC Jan 50 Call and has bought 1 ABC Apr 60 Call. This means he bought the option ABC with the longer expiration date and with a higher strike price and sold the option ABC with the near expiration date and the lower strike price. Here both the expiration and strike price are different. So this is an example of diagonal spread.

The option horizontal spread is incorrect because it is a spread that depicts the difference in expiration dates but strike price is the same. Here both the expiration and strike price are different.

The option straddle is incorrect because it is a spread in which both options have the same expiry date and same strike price. Here both the expiration and strike price are different.

The option dialogue spread is not a valid option too.

The option Combination is also suitable because this is an example of Combination and combinations include option spread trades such as vertical spreads, horizontal spreads, and diagonal spreads.

So the most suitable option is diagonal spread which is an example of Combination.

5 0

3 years ago

Could someone help me on my resume for my career class?

zavuch27 [327]

I can help you with you're resume, just message me.

7 0

3 years ago