Assuming you are an investor with GHS100 available. If you invest GHS60 and GHS40 in Allos Inc. and Orangus Inc. respectively, what will be your portfolio returns? 4.Calculate the Standard deviation of the portfolio
Assuming you are an investor with GHS100 available. If you invest GHS60 and GHS40 in Allos Inc. and Orangus Inc. respectively, what will be your portfolio returns? 4.Calculate the Standard deviation of the portfolio
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Risk and return
Before understanding the concept of Risk and Return in Financial Management, understanding the two-concept Risk and return individually is necessary.
Capital Asset Pricing Model
Capital asset pricing model, also known as CAPM, shows the relationship between the expected return of the investment and the market at risk. This concept is basically used particularly in the case of stocks or shares. It is also used across finance for pricing assets that have higher risk identity and for evaluating the expected returns for the assets given the risk of those assets and also the cost of capital.
Question
Assuming you are an investor with GHS100 available. If you invest GHS60 and GHS40 in Allos Inc. and Orangus Inc. respectively, what will be your portfolio returns?
4.Calculate the Standard deviation of the portfolio.
Transcribed Image Text:• Suppose financial analysts believe that there are four equally likely states
of the economy: depression, recession, normal, and boom. The returns
on the Supertech Company are expected to follow the economy closely,
while the returns on the Slowpoke Company are not. The return
predictions are as follows:
States of the economy
Depression
-20%
5%
Recession
10%
20%
Normal
30%
-12%
Boom
50%
9%
• Required:
For each company calculate:
the expected returns
1.
i.
ii.
the Variance
the Standard deviation
2.
For each company calculate and explain:
i.
The covariance
ii.
The correlation
Assuming you are an investor with GHS100 available. If you invest
GHS60 and GHS40 in Allos Inc. and Orangus Inc. respectively, what
will be your portfolio returns?
Calculate the Standard deviation of the portfolio.
3.
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