You are deciding between two portfolios; Portfolio A which is made up of stocks and treasury bills, and Portfolio B whi comprises of risky bonds and treasury bills. The table below contains information on both portfolios that you collectec Information Portfolio A Portfolio B Mean returns 0,13 0,16 Standard Deviation 0,11 0,09 Expected Returns 0,15 0,12 Threshold level 0,07 0,07 a) What is the probability thàt the returns of Portfolio A lie between 15 and 25 percent? b) If the probability that the returns of Portfolio B would be greater than X is 0.2676, what is the value of X?

Holt Mcdougal Larson Pre-algebra: Student Edition 2012
1st Edition
ISBN:9780547587776
Author:HOLT MCDOUGAL
Publisher:HOLT MCDOUGAL
Chapter11: Data Analysis And Probability
Section11.8: Probabilities Of Disjoint And Overlapping Events
Problem 2C
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You are deciding between two portfolios; Portfolio A which is made up of stocks and treasury bills, and Portfolio B which
comprises of risky bonds and treasury bills. The table below contains information on both portfolios that you collected.
Information
Portfolio A
Portfolio B
Mean returns
0,13
0,16
Standard Deviation
0,11
0,09
Expected Returns
0,15
0,12
Threshold level
0,07
0,07
a) What is the probability thàt the returns of Portfolio A lie between 15 and 25 percent?
b) If the probability that the returns of Portfolio B would be greater than X is 0.2676, what is the value of X?
c) Which portfolio is the optimal portfolio considering your threshold level?
d) For the optimal portfolio found in (c), what is the probability that the portfolio will earn a return below the threshold level?
Transcribed Image Text:You are deciding between two portfolios; Portfolio A which is made up of stocks and treasury bills, and Portfolio B which comprises of risky bonds and treasury bills. The table below contains information on both portfolios that you collected. Information Portfolio A Portfolio B Mean returns 0,13 0,16 Standard Deviation 0,11 0,09 Expected Returns 0,15 0,12 Threshold level 0,07 0,07 a) What is the probability thàt the returns of Portfolio A lie between 15 and 25 percent? b) If the probability that the returns of Portfolio B would be greater than X is 0.2676, what is the value of X? c) Which portfolio is the optimal portfolio considering your threshold level? d) For the optimal portfolio found in (c), what is the probability that the portfolio will earn a return below the threshold level?
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