Do you have to be rich to invest in bonds and real estate? No, mutual fund shares are available to you even if you aren't rich. Let x represent annual percentage return (after expenses) on the Vanguard Total Bond Index Fund, and let y represent annual percentage return on the Fidelity Real Estate Investment Fund. Over a long period of time, we have the following population estimates. Hx = 7.34, Ox = 6.55, Hy = 13.15, Oy = 18.55, p z 0.424 (a) Do you think the variables x and y are independent? Explain your answer. o Yes. Interest rate probably affects both investment returns. o No. Interest rates probably has no effect on the investment returns. o No. Interest rate probably affects both investment returns. o Yes. Interest rates probably has no effect on the investment returns. (b) Suppose you decide to put 60% of your investment in bonds and 40% in real estate. This means you will use a weighted average w = 0.6x + 0.4y. Estimate your expected percentage return uw and risk ow. Pw = Ow = (c) Repeat part (b) if w = 0.4x + 0.6y. Hw = Ow = (d) Compare your results in parts (b) and (c). Which investment has the higher expected return? Which has the greater risk as measured by ow? O w = 0.6x + 0.4y produces higher return with greater risk as measured by ow. O w = 0.6x + 0.4y produces higher return with lower risk as measured by ow. o Both investments produce the same return with the same risk as measured by ow- O w = 0.4x + 0.6y produces higher return with lower risk as measured by ow: O w = 0.4x + 0.6y produces higher return with greater risk as measured by ow.
Do you have to be rich to invest in bonds and real estate? No, mutual fund shares are available to you even if you aren't rich. Let x represent annual percentage return (after expenses) on the Vanguard Total Bond Index Fund, and let y represent annual percentage return on the Fidelity Real Estate Investment Fund. Over a long period of time, we have the following population estimates. Hx = 7.34, Ox = 6.55, Hy = 13.15, Oy = 18.55, p z 0.424 (a) Do you think the variables x and y are independent? Explain your answer. o Yes. Interest rate probably affects both investment returns. o No. Interest rates probably has no effect on the investment returns. o No. Interest rate probably affects both investment returns. o Yes. Interest rates probably has no effect on the investment returns. (b) Suppose you decide to put 60% of your investment in bonds and 40% in real estate. This means you will use a weighted average w = 0.6x + 0.4y. Estimate your expected percentage return uw and risk ow. Pw = Ow = (c) Repeat part (b) if w = 0.4x + 0.6y. Hw = Ow = (d) Compare your results in parts (b) and (c). Which investment has the higher expected return? Which has the greater risk as measured by ow? O w = 0.6x + 0.4y produces higher return with greater risk as measured by ow. O w = 0.6x + 0.4y produces higher return with lower risk as measured by ow. o Both investments produce the same return with the same risk as measured by ow- O w = 0.4x + 0.6y produces higher return with lower risk as measured by ow: O w = 0.4x + 0.6y produces higher return with greater risk as measured by ow.
Linear Algebra: A Modern Introduction
4th Edition
ISBN:9781285463247
Author:David Poole
Publisher:David Poole
Chapter4: Eigenvalues And Eigenvectors
Section4.6: Applications And The Perron-frobenius Theorem
Problem 22EQ
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