You are a junior analyst that is tasked with assessing the performance of a portfolio (Portfolio A). You know that returns are impacted by the economic state the country is in so you started the analysis by making the following predictions about the odds of an economic state occurring and the returns in each state. State of the Odds of Return in economy state state occurring Recession 1 to 4 8% Normal 2 to 1 14% Growth Вoom 1 to 1 20%

Algebra and Trigonometry (6th Edition)
6th Edition
ISBN:9780134463216
Author:Robert F. Blitzer
Publisher:Robert F. Blitzer
ChapterP: Prerequisites: Fundamental Concepts Of Algebra
Section: Chapter Questions
Problem 1MCCP: In Exercises 1-25, simplify the given expression or perform the indicated operation (and simplify,...
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a) Calculate the probabilities of the country being in each state of the economy. (3) b) Using the probabilities calculated in a, compute the expected return for this portfolio. (2,5) c) Calculate the variance and standard deviation of this portfolio. Your final answer for standard deviation must be left to two decimal places. (4,5) d) If Portfolio B, a similar portfolio, generates a return of 16% and has a standard deviation of 6,25%, which portfolio would you decide to invest in between A and B? (2)
You are a junior analyst that is tasked with
assessing the performance of a portfolio
(Portfolio A). You know that returns are
impacted by the economic state the
country is in so you started the analysis by
making the following predictions about the
odds of an economic state occurring and
the returns in each state.
State of the
Odds of
Return in
economy
state
state
occurring
Recession
1 to 4
8%
Normal
2 to 1
14%
Growth
Вoom
1 to 1
20%
Transcribed Image Text:You are a junior analyst that is tasked with assessing the performance of a portfolio (Portfolio A). You know that returns are impacted by the economic state the country is in so you started the analysis by making the following predictions about the odds of an economic state occurring and the returns in each state. State of the Odds of Return in economy state state occurring Recession 1 to 4 8% Normal 2 to 1 14% Growth Вoom 1 to 1 20%
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