please help stuck a. What are her expected returns and the risk from her investment in the three assets? How do they compare with invessing in asset M alone? Hint Find the standard deviations of asset M and of the portiolio equally investe assets M, N, and O b. Could Sally reduce her total risk even more by using assets M and N only, assets M and O only, or assets N and O only? Use a 50/50 spit between the asset pairs, and find the standard deviation of each asset pair Roturm 0% a. What is the expected return of investing equally in all three assets M, N, and 0? %(Round to two decimal places ) What is the expected return of investing in asset M alone? % (Round to two decimal places.) What is the standard deviation of the portfolio that invests equaly in all three assets M. N, and 07 Click to select your answer(s) Recessión | |% (Round to two decimal places) What is the standard deviation of the portfolio that invests equally in all three assets M, N, and O? % (Round to two decimal places) What is the standard deviation of asset M? 1% (Round to two decimal places ) Click to select your answer(s) 11% 12% b. What is the expected return of a portfolio of 50% asset M and 50% asset N? % (Round to two decmai places) What is the expected return of a portfolio of 50% asset M and 50% asset O? % (Round to two decimal places.) NA 50% Normal 2% 20% Recession What is the expected return of a portfolio of 50% asset N and 50% asset O? 96 (Round to two decimal places ) What is the standard deviation of a portfolio of 50% asset M and 50% asset N? 1% (Round to two decimal places) What is the standard deviation of a portfolio of 50% asset M and 50% asset。? Click to select your answer(s) 11% 8% 50% Normal 2% 20% Recession What is the standard deviation of a portfolio of 50% asset N and 50% asset O? (Round to two decimal places.) % Could Sally reduce her total risk even more by using assets M and N only, assets M and O only, or assets N and O only? (Select the best response ) A. Yes, a portfolio of 50% of asset M and 50% of asset O could reduce the risk to 0 50%. O B. There is not enough information to answer this question C. Yes a nn rtinlin nf 5nsh nf asset M and 5n9h nf asset N rnıld reduce the risk tn ( 50% Click to select your answer(s) a. What are her expected returns and the risk from her investment in the three assets? How do they compare with invessing in asset M alone? Hint Find the standard deviations of asset M and of the portiolio equally investe assets M, N, and O b. Could Sally reduce her total risk even more by using assets M and N only, assets M and O only, or assets N and O only? Use a 50/50 spit between the asset pairs, and find the standard deviation of each asset pair Roturm 0% a. What is the expected return of investing equally in all three assets M, N, and 0? %(Round to two decimal places ) What is the expected return of investing in asset M alone? % (Round to two decimal places.) What is the standard deviation of the portfolio that invests equaly in all three assets M. N, and 07 Click to select your answer(s) Recessión | |% (Round to two decimal places) What is the standard deviation of the portfolio that invests equally in all three assets M, N, and O? % (Round to two decimal places) What is the standard deviation of asset M? 1% (Round to two decimal places ) Click to select your answer(s) 11% 12% b. What is the expected return of a portfolio of 50% asset M and 50% asset N? % (Round to two decmai places) What is the expected return of a portfolio of 50% asset M and 50% asset O? % (Round to two decimal places.) NA 50% Normal 2% 20% Recession What is the expected return of a portfolio of 50% asset N and 50% asset O? 96 (Round to two decimal places ) What is the standard deviation of a portfolio of 50% asset M and 50% asset N? 1% (Round to two decimal places) What is the standard deviation of a portfolio of 50% asset M and 50% asset。? Click to select your answer(s) 11% 8% 50% Normal 2% 20% Recession What is the standard deviation of a portfolio of 50% asset N and 50% asset O? (Round to two decimal places.) % Could Sally reduce her total risk even more by using assets M and N only, assets M and O only, or assets N and O only? (Select the best response ) A. Yes, a portfolio of 50% of asset M and 50% of asset O could reduce the risk to 0 50%. O B. There is not enough information to answer this question C. Yes a nn rtinlin nf 5nsh nf asset M and 5n9h nf asset N rnıld reduce the risk tn ( 50% Click to select your answer(s)
Portfolio P is the probability of asset M, asset N, asset O, and portfolio P. average(m,n,o) (P*p) p*(P-E[r])^2 p*(m-E[r])^2 Boom 30% 12% 19% 2% 3. 60% 5. 70% 0. 60% 11% 3. 30% 0. 02% 0. 05% Normal 50% 8% 11% 8% 4. 00% 5. 50% 4. 00% 9% 4. 50% 0. 00% 0. 00% Recession 20% 2% -2% 12% 0. 40% -0. 40% 2. 40% 4% 0. 80% 0. 04% 0. 07% Expected return E[r] 8. 00% 10. 80% 7. 00% E[r] 8. 60% 0. 06% 0. 12% StDev 2. 46% 3. 46% a). Expected return of investing in all 3 assets = 8. 60% Expected return of investing in asset M = 8. 00% Standard deviation for a portfolio equally invested in all 3 assets = 2. 46% Standard deviation of asset M = 3. 46% By investing in the portfolio rather than only in asset M, Sally can increase her return by 0. 60% and decrease her risk by 1.01%. b). Probability (p) Asset M (m) Asset N (n) Asset O (o) Portfolio (P1) of M& N average(m,n) (P1*p) p*(P1-E[r])^2 Portfolio (P2) of M& O average(m,n) (P2*p) p*(P2-E[r])^2 Portfolio (P3) of N & O average(m,n) (P3*p) p*(P3-E[r])^2 Boom 30% 12% 19% 2% 16% 4. 65% 0. 11% 7% 2. 10% 0. 0008% 11% 3. 15% 0. 01% Normal 50% 8% 11% 8% 10% 4. 75% 0. 00% 8% 4. 00% 0. 0013% 10% 4. 75% 0. 00% Recession 20% 2% -2% 12% 0% 0. 00% 0. 18% 7% 1. 40% 0. 0005% 5% 1. 00% 0. 03% Expected return E[r] 9. 40% 0. 29% 7. 50% 0. 0025% 8. 90% 0. 04% StDev 5. 37% StDev 0. 50% StDev 2. 00% Expected return of a portfolio with 50% M and 50% N = 9. 40%; standard deviation for the (M,N) portfolio = 5. 37% Expected return of a portfolio with 50% M and 50% O = 7. 50%; standard deviation for the (M,O) portfolio = 0. 50% Expected return of a portfolio with 50% N and 50% O = 8. 90%; standard deviation for the (N,O) portfolio = 2. 00% Option A is correct.
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