Suppose you have a 40% chance of making $30 and a 60% change of making $70. If your Utility Function = Square Root of Income, what is your Risk Premium?
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Suppose you have a 40% chance of making $30 and a 60% change of making $70. If your Utility Function = Square Root of Income, what is your Risk Premium?
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- Your investment has a 40% chance of earning a 15% rate of return, a 50% chance of earning a 10% rate of return and a 10% chance of losing 3%. What is the standard deviation of this investment?Suppose you have a portfolio worth $10000. Assuming normally distributed portfolio returns, calculate the 5% Dollar VaR for the portfolio if the expected return is 24 % and variance 22 % .You think there is a 60% chance that an investment will rise by 18% and a 40% chance it will fall by 27%. What is the expected return?
- Consider a decision maker who is comfortable with an investment decision that has a50 percent chance of earning $25,000 and a 50 percent chance of losing $12,500, but notwith any larger investments that have the same relative payoffs. a. Write the equation for the exponential function that approximates this decision maker’sutility function2. Consider the following investment: A portfolio that pays a 30% rate of return with a probability of 60% or a 15% rate of return with a probability of 40%. If you invest $50,000 in this portfolio, what would be your expected profit?The rate of return on T-bills is 3.25% and the expected return on the market is 9.50%. J&X, Inc. had a beta (b) of .78. What is the required return (r) for J&X?
- The following table shows the one-year return distribution of Startup, Inc. Calculate: 1. The expected return. 2. The standard deviation of the return. Probability 40% 20% 20% 10% 10% Return - 100% - 75% - 50% - 25% 1000%Your expectations from a one year investment in Wang Computers are as follows: Probability Rate of Return .15 -.10 .15 -.20 .35 .00 .25 .15 .10 .15 expected rate of return? standard deviation? coeefecient of variation on investment?Suppose you have a project that has a .7 chance of doubling your investment in a year and a .3 chance of halving your investment in a year. What is the standard deviation of the rate of return on this investment?
- If the risk-free rate is 4.8 percent and the risk premium is 6.8 percent, what is the required return? (Round your answer to 1 decimal place.) Required Return: ___.__%Consider an asset that costs $120 today. You are going to hold it for 1 year and then sell it. Suppose that there is a 25 percent chance that it will be worth $100 in a year, a 25 percent chance that it will be worth $115 in a year, and a 50 percent chance that it will be worth $140 in a year. What is its average expected rate of return? Next, fifi gure out what the investment’s average expected rate of return would be if its current price were $130 today. Does the increase in the current price increase or decrease the asset’s average expected rate of return? At what price would the asset have a zero rate of return?Hastings Entertainment has a beta of 0.70. If the market return is expected to be 16.40 percent and the risk-free rate is 7.40 percent, what is Hastings’ required return? (Round your answer to 2 decimal places.) Hastings’ required return %