Based on the following probability distribution, what is the security's expected return? State Probability 1 0.2 -5.0% 2 0.3 10.0 3 0.5 30.0 What is the expected return of the following investment? Probability Payoff

For a market timer, the ________ will be higher when the market risk premium is higher Select one: a. portfolio’s idiosyncratic risk b. portfolio’s standard deviation c. portfolio’s beta d. security selection component of the portfolio e. portfolio’s alpha

Explain expected rate of return

The possible returns of a security I and research returns under three possible states are as follows. Probability % market % security 0.2 15 10 0.5 13 16 0.3 25 30 The risk free rate is 9%, determine the required rate of return of security I and sate whether it is correctly valued. 12-marks] 20 Ri= E(R) XW

Portfolio  Suppose      rA ~ N (0.05, 0.01), rB ~ N (0.1, 0.04) with pA,B = 0.2 where rA and rB are CCR’s.  a) Suppose you construct a portfolio with 50% for A and 50% for B. Find the variance of the portfolio CCR. b) Find the portfolio expected gross return. c) Find the expected portfolio CCR.

What is the expected return on asset A if it has a beta of 0.5, the expected market return is 13%, and the risk-free rate is 3%? O 6.5% 8% 9.5% 7% O 5%

The following expected return and the standard deviation of current returns are known:   Security (i) Expected Return Standard Deviation βi A 0.20 0.12 1.1 B 0.12 0.10 0.8 T-Bills 0.05 0 0 Market Portfolio 0.20 0.15 1 Required: Determine which of A or B is over-valued or undervalued.

The risk-free rate is 2%, the market risk premium is 8.00%, and portfolio A has a beta of 2. What is the required rate of return on this portfolio?

Consider the following securities: state Probability A B A B H M L 0.2 0.5 0.3 с 6 10 6 3 7 12 2 5 14 1. The expected payoff of A is: 2. The standard deviation of A is: 3. If the price of A is 3, its expected return is: 4. The covariance between A and B is: 5. The correlation coefficient between A and B is: 6. Is it possible to build a portfolio that has zero variance using A and C? YES/ NO

Rank the following risky investment projects based on stochastic dominance. Project P Project Q Payoff Probability Payoff Probability 20 0.3 30 0.25 40 0.4 50 0.25 70 0.2 60 0.25 80 0.1 90 0.25