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Notes #4

# Notes #4 - Portfolio Expected Return E(Kport)=sum...

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Notes #4 88 on Exam #3 Final Grade = A Portfolio Theory: “the j states of the world method” What if a portfolio? A collection of assets such as stocks and bonds held by an investor Portfolio Weights – percentage investment in each asset Suppose you have 15,000 to invest and you have purchased securities in the following amounts? Kraft Foods – 2,000 dollars- .1333 Coke – 3000 dollars - .2 Intel – 4000 dollars - .2667 Apple – 6000 dollars - .4
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Unformatted text preview: Portfolio Expected Return: E(Kport)=sum of ((wj)(E(kj)) E(kj) = expected return on security j Wj = weight security j contributes to the portfolio Risk and Return .133 .2 .267 .4 J State of the economy Pj Kkraft Kcoke Kintel Kapple Kport 1 Boom .55 19.69 5.25 16.65 18.24 15.41% 2 Bust .45 2.5 2.3-12.25 4.3-0.76% E(kport1)=(2.619+1.05+4.45+7.30)=15.415 E(kport2)=(.333+.46-3.27+1.72)=-0.76...
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