(a) Which investment type would you choose if you wanted to maxi accumulate value after 3 years ? Justify your choice and provide details of (b) Which investment type would you choose if you wanted to m after 3 years? Assume that risk is measured as the variance of your ac Justify your choice and provide details of your calculations.
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- Suppose you have a project that has a 0.4 chance of tripling your investment in a year and a 0.6 chance of halving your investment in a year. What is the standard deviation of the rate of return on this investment? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places.) What is the standard deviation?A project has a 0.6 chance of tripling your investment in a year and a 0.4 chance of halving your investment in a year. What is the standard deviation of the rate of return on this investment?I. Consider the following information about K oll and Nell for one-time period: Suppose that the correlation coefficient between the returns for Koll and Nell is -0.40'. If you invest 30% in Koll and 70% in Nell, what are the expected return and standard deviation of the portfolio? Interpret your results. II. The investor achieved the following annual rate of returns over the last four-year period: 25% in Y1, 15% in Y2, 20% in Y3, 10% in Y4. (a) Calculate the geometric average rate of return for the whole 4 year period. (b) Calculate the logarithmic average rate of return for the whole 4 year period. III. Suppose you have a portfolio of IBM and Dell with a beta of 0.4 and 1.1, respectively. If you put 40% of your money in IBM, 55% in Dell and 5% in the risk-free asset, calculate and interpret the beta of your portfolio. IV. Suppose that the beta value for Kei is 1.5, and the risk-free rate of interest is 4%. The investor wishes to (i) have a shareholding in only one company, Kei, and…
- A project has a 0.68 chance of doubling your investment in a year and a 0.32 chance of halving your investment in a year. What is the standard deviation of the rate of return on this investment?Suppose you have a project that has a 0.8 chance of doubling your investment in a year and a 0.2 chance of halving your investment in a year. What is the standard deviation of the rate of return on this investment? (Do not round intermediate calculations. Enter your answer as a decimal rounded to 4 places.)An investor has $100,000 available for 1-year investment. The investor is weighing two options: a money market fund that gives a fixed annual return of 12% and an investment plan with an annual rate of return that can be regarded as a random variable with values that depend on prevailing economic conditions. Based on the second plan’s past history under a variety of economic conditions, a very reliable analyst has subjectively determined the following probabilities associated with several possible rates of return: Rate of Return Probability 0.3 0.20 0.25 0.20 0.20 0.30 0.15 0.10 0.10 0.10 0.05 0.10 a) If you chose option 2, what is the probability that the rate of return will be less than that of the first option? Show work.
- An investor has $100,000 available for 1-year investment. The investor is weighing two options: a money market fund that gives a fixed annual return of 12% and an investment plan with an annual rate of return that can be regarded as a random variable with values that depend on prevailing economic conditions. Based on the second plan’s past history under a variety of economic conditions, a very reliable analyst has subjectively determined the following probabilities associated with several possible rates of return: Rate of Return Probability0.3 0.200.25 0.200.20 0.300.15 0.100.10 0.100.05 0.10 Suppose there were a third investment plan with return rates and associated probabilities as follows: Rate of Return Probability 0.23 0.40 0.20 0.40 0.18 0.10 0.10 0.10 a) Between the second and the…Suppose that you have $1 million and the following two opportunities from which to construct a portfolio:a. Risk-free asset earning 12% per year.b. Risky asset with expected return of 30% per year and standard deviation of 40%.If you construct a portfolio with a standard deviation of 30%, what is its expected rate of return?An investment has an expected return of 12 percent per year with a standard deviation of 6 percent. Assuming that the returns on this investment are at least roughly normally distributed, what percentage of the time do you expect to lose money?
- A project has a 0.92 chance of doubling your investment in a year and a 0.08 chance of halving your investment in a year. What is the standard deviation of the rate of return on this investment? (Do not round intermediate calculations. Round your answer to 2 decimal places.)a. According to the rule of 72, how many times your money will be doubled over a 36- year period if it earns a rate of return of 8% per year? b. Using the rule of 72, estimate the value of an initial investment of $100K at the end of a 36-year period if it earns a rate of return of 8% per year? c. According to the 4% rule, what the size of your investment portfolio needs to be in order for you to withdraw an initial annual amount of $250K? d. Referring to part c, what will be your 3 rd annual withdrawal amount if the inflation rate during the 2 years since your initial withdrawal averaged 2% per year? Show your work.What is the expected return of a portfolio that has $8,000 invested in S and $2,000 invested in T? The risk-free rate is 6% and the market portfolio's return is 14%. Do you expect the investment to be a good one for the coming year if betas for the two portfolio components are 0.6 and 1.3, respectively?