Answered: b. If KA recommends that the client…

MATLAB: An Introduction with Applications

6th Edition

ISBN:9781119256830

Author:Amos Gilat

Publisher:Amos Gilat

Chapter1: Starting With Matlab

Section: Chapter Questions

Problem 1P

See similar textbooks

Related questions

Question

100%

Please answer B and C.

The Knowles/Armitage (KA) group at Merrill Lynch advises clients on how to create a diversified investment portfolio. One of the investment alternatives they make available to clients is the All World Fund composed of global stocks with good dividend yields. One of their clients is interested in a portfolio consisting of investment in the All World Fund and a treasury bond fund. The expected percent return of an investment in the All World Fund is 10% with a standard deviation of 17.60% . The expected percent return of an investment in a treasury bond fund is 5.90% and the standard deviation is 3.60%. The covariance of an investment in the All World Fund with an investment in a treasury bond fund is -14.5.

b. If KA recommends that the client invest 75% in the All World Fund and 25% in the treasury bond fund, what is the expected percent return and standard deviation for such a portfolio?

What would be the expected return and standard deviation, in dollars, for a client investing 10,000 in such a portfolio?

c.If KA recommends that the client invest 25% in the All World Fund and 75% in the treasury bond fund, what is the expected return and standard deviation for such a portfolio?

What would be the expected return and standard deviation, in dollars, for a client investing 10,000 in such a portfolio?

The Knowles/Armitage (KA) group at Merrill Lynch advises clients on how to create a diversified investment portfolio. One of the investment alternatives they make available to clients is the All World
Fund composed of global stocks with good dividend yields. One of their clients is interested in a portfolio consisting of investment in the All World Fund and a treasury bond fund. The expected
percent return of an investment in the All World Fund is 10.00% with a standard deviation of 17.60%. The expected percent return of an investment in a treasury bond fund is 5.90% and the
standard deviation is 3.60%. The covariance of an investment in the All World Fund with an investment in a treasury bond fund is -14.5.
a. Which of the funds would be considered the more risky?
All World stock fund
Why?
It has a larger standard deviation ✓
b. If KA recommends that the client invest 75% in the All World Fund and 25% in the treasury bond fund, what is the expected percent return and standard deviation for such a portfolio?
Expected return
Standard deviation
Expected return
Standard deviation
What would be the expected return and standard deviation, in dollars, for a client investing $10,000 in such a portfolio?
Expected return
Standard deviation
8.975%
Expected return
Standard deviation
%
c. If KA recommends that the client invest 25% in the All World Fund and 75% in the treasury bond fund, what is the expected return and standard deviation for such a portfolio?
LA
LA
do do
(to 3 decimals)
(to 3 decimals)
%
%
(to the nearest cent)
(to the nearest cent)
What would be the expected return and standard deviation, in dollars, for a client investing $10,000 in such a portfolio?
(to 3 decimals)
(to 3 decimals)
(to the nearest cent)
(to the nearest cent)

Definition Definition Measure of how two random variables change together. Covariance indicates the joint variability or the directional relationship between two variables. When two variables change in the same direction (i.e., if they either increase or decrease together), they have a positive covariance. When the change is in opposite directions (i.e., if one increases and the other decreases), the two variables have a a negative covariance.

Expert Solution