Finance - e.) Suppose you created a two-stock portfolio by...

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e.) Suppose you created a two-stock portfolio by investing $50,000 in High Tech and $50,000 in Collections. 1.) Calculate the expected return, the standard deviation, and the coefficient of variation for this portfolio and fill in the appropriate blanks in the table. RETURNS ON ALTERNATIVE INVESTMENTS ESTIMATED RATE OF RETURNS State of the Economy Probabilit y T-Bills High Tech Collection s U.S. Rubber Market Portfolio 2-stock Portfolio Recession 0.1 5.5% (27.0%) 27.0% 6.0% (17.0%) 0.0% Below Average 0.2 5.5 (7.0) 13.0 (14.0) (3.0) 3.0 Average 0.4 5.5 15.0 0.0 3.0 10.0 7.5 Above Average 0.2 5.5 30.0 (11.0) 41.0 25.0 9.5 Bloom 0.1 5.5 45.0 (21.0) 46.0 38.0 12.0 5.5 12.4% 1.0% 9.8% 10.5% 6.7% σ 0.0 20% 13.2 18.8 15.2 3.4 CV 0.0 1.6% 13.2 1.9 1.4 0.5 b 0.00 1.32 -0.87 0.88 1.00 0.23 Solutions: *We are already given with the σ and the CV, so we shall only solve for the remaining blanks which include: The Estimated return of the portfolio at Below Average & Above Average . The
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This note was uploaded on 02/20/2012 for the course ACCOUNTING 102 taught by Professor Calamba during the Summer '11 term at Universität St. Gallen (HSG).

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Finance - e.) Suppose you created a two-stock portfolio by...

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