You own a portfolio with 41% invested in stock X, 37% invested in stock Y, and 22% invested in stock Z. There is a 56% probability of a good economy and a 44% probability of a bad economy. Returns in a good economy are expected to be: -5% for X, 23% for Y, and 31% for Z. Returns in a bad economy are expected to be: 14% for X, 6% for Y, and 1% for Z. 1. Your portfolio suffered a terrible year that was three standard deviations below the expected portfolio return. What was your return? (percentage) 2. What is the variance of your portfolio? (decimal, four places right of the decimal)
You own a portfolio with 41% invested in stock X, 37% invested in stock Y, and 22% invested in stock Z. There is a 56% probability of a good economy and a 44% probability of a bad economy. Returns in a good economy are expected to be: -5% for X, 23% for Y, and 31% for Z. Returns in a bad economy are expected to be: 14% for X, 6% for Y, and 1% for Z. 1. Your portfolio suffered a terrible year that was three standard deviations below the expected portfolio return. What was your return? (percentage) 2. What is the variance of your portfolio? (decimal, four places right of the decimal)
Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter2: Risk And Return: Part I
Section: Chapter Questions
Problem 3Q: Security A has an expected return of 7%, a standard deviation of returns of 35%, a correlation...
Related questions
Question
You own a portfolio with 41% invested in stock X, 37% invested in stock Y, and 22% invested in stock Z. There is a 56% probability of a good economy and a 44% probability of a bad economy. Returns in a good economy are expected to be: -5% for X, 23% for Y, and 31% for Z. Returns in a bad economy are expected to be: 14% for X, 6% for Y, and 1% for Z.
1. Your portfolio suffered a terrible year that was three standard deviations below the expected portfolio return. What was your return? (percentage)
2. What is the variance of your portfolio? (decimal, four places right of the decimal)
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 3 steps with 8 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Recommended textbooks for you
Intermediate Financial Management (MindTap Course…
Finance
ISBN:
9781337395083
Author:
Eugene F. Brigham, Phillip R. Daves
Publisher:
Cengage Learning
Intermediate Financial Management (MindTap Course…
Finance
ISBN:
9781337395083
Author:
Eugene F. Brigham, Phillip R. Daves
Publisher:
Cengage Learning