Nikul Maria recently invested in real estate with the intention of selling the property one year from today. She has modeled the returns onthat investment based on three economic scenarios. She believes that if the economy.stays healthy, then her investment will generatea 30 percent return. However, if the economy softens, as predicted, the return will be 10 percent, while the return will be -25 percent ifthe economy slips into a recession. If the probabilities of the healthy, soft, and recessionary states are 0.6, 0.2, and 0.2, respectively,then what are the expected return and the standard deviation of the return on Maria's investment? (Round intermediatecalculations to 5 decimal places, e.g. 0.07680, expected return to 2 decimal places, e.g. 12.25% and standard deviation to 3decimal places, e.g. 0.125.)Expected returnStandard deviation%

Step 1:Given:Probability of healthy economy (p₁) = 0.6Probability of soft economy (p₂) =…

Answered: Maria recently invested in real estate…

Pfin (with Mindtap, 1 Term Printed Access Card) (mindtap Course List)

7th Edition

ISBN:9780357033609

Author:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk

Publisher:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk

Chapter13: Investing In Mutual Funds, Etfs, And Real Estate

Section: Chapter Questions

Problem 9FPE

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Mary recently invested in real estate with the intention of selling the property one year from today. She has modeled the returns on that investment based on three economic scenarios. She believes that if the economy stay healthy, then her investment will generate a 30 percent return. However, if the economy softens, as predicted, the return will be 10 prrcent, while the return will be -25 percent if the economy slips into a recession. If the probabilities of the healthy, soft, and recessionary states are 0.3, 0.4, and 0.3, then what are the expected return and the standard deviation of the return on Mary's investment? Expected return =? SD =?
Kimberly recently invested in real estate with the intention of selling the property one year from today. She has modeled the returns on that investment based on three economic scenarios. She believes that if the economy stays healthy, then her investment will generate a 30 percent return. However, if the economy softens, as predicted, the return will be 10 percent, while the return will be -25 percent if the economy slips into a recession. Assume the probabilities of the healthy, soft, and recessionary states are 0.3, 0.4, and 0.3, respectively.Calculate the coefficient of variation for the investment. (Round answer to 5 decimal places, e.g. 0.07680.) Coefficient of variation
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A long time ago Lisa had put an amount of $50,000 into an investment in the securities market. Now she has $150,000 in her investment account. Required: If the average rate of return Lisa earned for the investment is 7.6% per year, how many years she has maintained the investment so far? If Lisa would have wished to obtain the target of $150,000 within 10 years only, how much money should she put into the initial investment given the same rate of return is applied? Assume that Lisa would like to put the amount of $150,000 into another investment and aims for a new saving target of $500,000 to buy a new house in 12 years. How much is the rate of return should Lisa aim for to get her $500,000 after 12 years? Lisa has another option for her plan to buy a new house: Using $150,000 as a deposit and get a mortgage from a bank to buy the new house. ANZ bank offered Lisa the lending interest rate of 4.85% per year, compounding semi-annually. Commonwealth Bank offered her a lending rate of…

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