Assuming the following returns and corresponding probabilities for Asset D: Rate of Return Probability 10% 30% 15% 40% 20% 30% Compute for: a. Expected rate of return b. The standard deviation c. The coefficient of variation
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Assuming the following returns and corresponding probabilities for Asset D:
| Probability | |
| 10% | 30% |
| 15% | 40% |
| 20% | 30% |
Compute for:
a. Expected rate of return
b. The standard deviation
c. The coefficient of variation
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- Assuming that the rates of return associated with a given asset investment are normally distributed; that the expected return, r, is 18.7%; and that the coefficient of variation, CV, is 1.88, answer the following questions: a. Find the standard deviation of returns, sigma Subscript rσr. b. Calculate the range of expected return outcomes associated with the following probabilities of occurrence: (1) 68%, (2) 95%, (3) 99%.Four assets have the following distribution of returns. Probability Rate of return (%)Occurrence A B C D0.1 10.0 6.0 14.0 2.00.2 10.0 8.0 12.0 6.00.4 10.0 10.0 10.0 9.00.2 10.0 12.0 8.0 15.00.1 10.0 14.0 6.0 20.0 In each asset alculate The expected rate of return, standard deviation, variance coefficient of variationAsset M Asset N j P?? Return, ?? P?? Return, ?? 1 0.25 10% 0.15 10% 2 0.25 -6% 0.30 8% 3 0.15 2% 0.20 15% 4 0.20 5% 0.05 0% 5 0.15 20% 0.30 -2% Calculate the expected value of return, ?̅, for each of the two assets. Which provides the largest expected return? Calculate the standard deviation, ?? , for each of the two assets’ returns. Which appears to have the greatest risk? Calculate the portfolio expected return if you invest 27% of your wealth in M and 73% inN, of your total wealth of $40,000.
- Suppose the average return on Asset A is 6.6 percent and the standard deviation is 8.6 percent and the average return and standard deviation on Asset B are 3.8 percent and 3.2 percent, respectively. Further assume that the returns are normally distributed. Use the NORMDIST function in Excel® to answer the following questions. a. What is the probability that in any given year, the return on Asset A will be greater than 11 percent? Less than 0 percent? (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) b. What is the probability that in any given year, the return on Asset B will be greater than 11 percent? Less than 0 percent? (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) c-1. In a particular year, the return on Asset A was −4.25 percent. How likely is it that such a low return will recur at some point in the future? (Do…Normal probability distribution Assuming that the rates of return associated with a given asset investment are normally distributed; that the expected return, r, is 10.4%; and that the coefficient of variation, CV, is 1.01, answer the following questions: a. Find the standard deviation of returns, σr. b. Calculate the range of expected return outcomes associated with the following probabilities of occurrence: (1) 68%, (2) 95%, (3) 99%.You have data on the following assets: asset Expected return Standard DeviationA 15.0% 21.0%B 15.5% 20.2%C 18.0% 25.0% Calculate the coefficient of variation for each of the assets. Which one is the best investment option?
- uppose the average return on Asset A is 7.1 percent and the standard deviation is 8.3 percent, and the average return and standard deviation on Asset B are 4.2 percent and 3.6 percent, respectively. Further assume that the returns are normally distributed. Use the NORMDIST function in Excel® to answer the following questions. a. What is the probability that in any given year, the return on Asset A will be greater than 12 percent? Less than 0 percent? (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) b. What is the probability that in any given year, the return on Asset B will be greater than 12 percent? Less than 0 percent? (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) c-1. In a particular year, the return on Asset A was −4.38 percent. How likely is it that such a low return will recur at some point in the future? (Do not round…Assume that you have obtained the following information for Asset A: Rate of Return Probability 5.5% 25% 7.25% 55% 11% 20% Compute the expected rate of return for Asset A, using the information provided in thechart above Assume that the standard deviation of the expected returns for Asset A is 1.87%. With information and the expected rate of return that you calculated for Asset A in Part A of this problem, compute the co-efficient of variation for Asset A.The expected value and the standard deviation of returns for asset A is 12.7% and 2.3% 12.7% and 4% 12% and 4% 12% and 2.3%
- An asset has an average return of 10.11 percent and a standard deviation of 19.02 percent. What range of returns should you expect to see with a 68 percent probability? Multiple Choice −18.42% to 38.64% −46.95% to 67.17% −8.91% to 11.31% −27.93% to 48.15% −8.91% to 29.13%Suppose the returns on an asset are normally distributed. The historical average annual return for the asset was 5.2 percent and the standard deviation was 10.6 percent. a. What is the probability that your return on this asset will be less than –9.7 percent in a given year? Use the NORMDIST function in Excel® to answer this question. b. What range of returns would you expect to see 95 percent of the time? c. What range of returns would you expect to see 99 percent of the time?Consider the case of two financial assets and three market conditions (states). The tablebelow gives the respective probability for each market condition and the return of each assetin each one of them. Market Conditions State Recession Normal Expansion Probability of state 30% 40% 30% Return of asset A -30% 20% 55% Return of asset B -10% 70% 0% Consider the portfolio with 50% investment in each of the two assets above. Calculatethe expected return and the standard deviation of the portfolio.
