class exercises - introduction to risk & return
TRANSCRIPT
-
7/21/2019 Class Exercises - Introduction to Risk & Return
1/4
-
7/21/2019 Class Exercises - Introduction to Risk & Return
2/4
Q). S"e$ari! A$a'*sis.T#e common stock o+ ,sca$ist -ilms sells +or 25 a s#areand o/ers t#e +ollowin* $ayo/s net year:
Di+ie$
S!"kPri"e
oom 0 18
ormal 1 26ecession 3 3
4alculate t#e e$ected return and standard de)iation o+ ,sca$ist. ll t#ree scenariosare eually likely. T#en calculate t#e e$ected return and standard de)iation o+ a$ort+olio #al+ in)ested in ,sca$ist and #al+ in eanin* Tower o+ 'ita +rom $roblem1. %#ow t#at t#e $ort+olio standard de)iation is lower t#an eit#er stocks. ,$lainw#y t#is #a$$ens.
'a*e o+ (
-
7/21/2019 Class Exercises - Introduction to Risk & Return
3/4
-
7/21/2019 Class Exercises - Introduction to Risk & Return
4/4
Q() P!r!'i! A$a'*sis. =se t#e data in t#e $re)ious $roblem and consider a$ort+olio wit# wei*#ts o+ .60 in stocks and .0 in bonds.
a. "#at is t#e rate o+ return on t#e $ort+olio in eac# scenario(b. "#at is t#e e$ected rate o+ return and standard de)iation o+ t#e $ort+olio(
c. "ould you $re+er to in)est in t#e $ort+olio> in stocks only> or in bonds only(
'a*e (o+ (