Answered: You have been approached by Onua Do Ltd…

PFIN (with PFIN Online, 1 term (6 months) Printed Access Card) (New, Engaging Titles from 4LTR Press)

6th Edition

ISBN:9781337117005

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 8FPE

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Question 5
You have been approached by Onua Do Ltd who wants to know how their portfolio is fairing. The Company has over the years spread their funds in this order: 30% stock in A, 50% stock in B and the rest in stock C.
State of Economy
Boom Normal Recession
Probability Stock A Return
0.10 24% 0.70 11% 0.20 -30%
Stock B Return 5%
6%
7%
Stock C Return 14% 9% -5%
a). What is the standard deviation of their portfolio?
b). Explain the following and analyze how they affects trading decision(s) making and
analysis of investments:
i) Snakebite effect
ii) House-moneyeffect iii) Endowment effect iv) Disposition effect v) Overconfidence

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