70.2K

Verified Solution

Link Copied!

please help

Benefits of diversification. Sally Rogers has decided to invest her wealth equally across the following three assets. a. What are her expected returns and the risk from her investment in the three assets? How do they compare with investing in asset M alone? Hint Find the standard deviations of asset M and of the portfolio equally invested in assets M. N, and O b. Could Sally reduce her total risk even more by using assets M and N only assets M and O only or assets N and O only? Use a 50/50 split between the asset pairs and find the standard deviation of each Probability States 30% Boom 8% 50% Normal 2% 20% Recession a. What is the expected return of investing equally in all three assets M, N, and O? | |% (Round to two decimal places.) What is the expected return of investing in asset M alone? )% (Round to two decimal places ) What is the standard deviation of the portfolio that invests equally in all three assets M N, and 02 1% (Round tn twn decimal nlaces l Click to select your answer(s) assets M, N, and O t Coult Sal, itto he t ta m kever more by using a sets MadNariyas'ets M an slit between the asset pars, and find the standard de ation of each as an Oonl ? Use a 5 15 oo r assets 30% Round to two % (Round to two decimal p and decrease her risk by % by vesting n he pr that vests equally all three assets N, and Orather than asset Malone Saly can benefit by increasing herre ur 1 y b, what is the expected retum of a portfolio of 50% asset M and 50% asset N7 -1% (Round to two decimal places ) 8 6 5 et N Roturn 19% 50% tv % Rund to two decral places ) What is the expected return of a portfolio of 50% asset N and 50% asset O? gb 6 4 3 12% 11% What is the standard deviation of a portfolio of 50% asset M and 50% asset? %(Round to two decimal places) mat is the standard deviation of a portfolio of 50% asset N and 50% asset O? L1% (Round to two decimal places) Could Sally reduce her total risk even more by using assets M and N only, assets M and O only, or assets N and O only? (Select the best response) 8 6 % (Round to two decimal places) Could Sally reduce her total risk even more by using assets M and N only, assets Mand O only, or assets N and O only? (Select the best response) o A. Yes, a portfolio of 50% of asset M and 50% of asset O could reduce the risk to 0 50% O B. There is not enough information to answer this question. c. Yes, a portfolio of 50% of asset M and 50% of asset N could reduce the risk to 0.50% O D. No, none of the portfolios using a 50-50 split reduce risk Click to select your answer(s). Esc 6 4 3

Answer & Explanation Solved by verified expert

See Answer