5 Problem 13-6 (Algo) Coefficient of variation [LO13-1] Possible outcomes for three investment alternatives and their probabilities of occurrence are given next. Failure Acceptable eBook Successful Hint Alternative 1 Outcomes 30 Probability Outcomes Alternative 2 Probability Alternative 3 Outcomes Probability 0.20 80 0.40 90 0.40 60 120 0.20 140 0.20 225 0.40 0.60 210 0.40 380 0.20 Using the coefficient of variation, rank the three alternatives in terms of risk from lowest to highest. Note: Do not round intermediate calculations. Round your answers to 3 decimal places. Coefficient of Variation Rank Print Alternative 1 Alternative 2 Alternative 3 References
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- Problem 13-6 (Algo) Coefficient of variation [LO13-1] Possible outcomes for three investment alternatives and their probabilities of occurrence are given next. Failure Acceptable Successful Alternative 1 Alternative 2 Outcomes Probability Outcomes Probability 0.10 80 0.20 0.50 195 0.40 0.40 250 0.40 Alternative 1 Alternative 2 Alternative 3 30 70 105 Coefficient of Variation Alternative 3 Using the coefficient of variation, rank the three alternatives in terms of risk from lowest to highest. Note: Do not round intermediate calculations. Round your answers to 3 decimal places. Rank Outcomes 110 350 400 Probability 0.30 0.50 0.20Investment Expected Return Standard Deviation1 0.12 0.302 0.15 0.503 0.21 0.164 0.24 0.21Based on the utility formula we covered in lectures,a. Calculate the utility of each investment alternative for an investor with risk averse A=4:The utility of Investment 1The utility of Investment 2The utility of Investment 3The utility of Investment 4b. State which investment you would select if you were risk averse with A=4: Blank 5. Fill in the blank, read surrounding text. c. State which investment you would select if you were risk averse with A=2: Blank 6. Fill in the blank, read surrounding text.. d. State which investment you would select if you were risk neutral: Blank 7. Fill in the blank, read surrounding text.TOTAL VS. SYSTEMATIC RISK • Consider the following information: Standard Deviation BetaSecurity C 20% 1.25Security K 30% 0.95 • Which security has more total risk?• Which security has more systematic risk?• Which security should have the higherexpected return?
- Refer to the following payoff table (values are profit): State of Nature Alternative S1 S2 A1 75 −40 A2 0 100 Prior Probability 0.6 0.4 What is the expected payoff of the decision strategy (i.e. using the EMV/EP criterion)?Possible outcomes for three investment alternatives and their probabilities of occurrence are given next. Alternative 1 Outcomes Probability Alternative 3 Probability Acceptable Successful 80 135 Altemative 1 Altemative 2 Altemative 3 Using the coefficient of variation, rank the three alternatives in terms of risk from lowest to highest. (Do not round intermediate calculations. Round your answers to 3 decimal places.) Alternative 2 Outcomes Probability Outcomes 70 85 130 325 265 410 Coefficient of VariationQ11. n is the number of periods of an investment, PV is the starting value, FVn is the future value n periods ahead, and ^ means 'to the power of'. What is the correct formula for calculating return? Group of answer choices 1. (FVn/PV)^n - 1 2. (FVn/PV)^n 3. (PV/FVn)^n - 1 4. 1 - (FVn/PV)^n
- Exhibit 7.1USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM Rates of Return Year RA Computer Market Index 1 13 17 2 9 15 3 –11 6 4 10 8 5 11 10 6 6 12 Refer to Exhibit 7.1. The equation of the characteristic line for RA is a. RRA = –7.98 + 1.1023RMI. b. RRA = –9.41 + 1.3893RMI. c. RRA = –4.92 – 0.7715RMI. d. RRA = 11.63 + 1.2195RMI. e. RRA = 4.92 + 0.7715RMI.Example 3 Inns oont alafrA Following Example 2, consider a porfolio with three assets S1, S2 and S3 which have expected rates of return 0.1,0.15 and 0.2 respectively, and variance-covariance matrix odni tanoma bszt a aitevi ot botoly 0.1 0.1 -0.1 0.1 0.2 0.1 ololles V = -0.1 0.1 0.6 vo ) isaas sod slais a at gaiteoo ottg ndi oda vodT (aldanoitesup als ot-lais wod ibuadala abnod on a) What is the optimal portfolio when up = worod of sidad = 0.2. adt yhalinie ini ba moe ja SOLUTION lo ano ot b) Use this piece of information and the earlier optimal portfolios from la aao e. Example 2 to find the quadratic equation relating of and up. ni bstni sd SOLUTION tar oad o bo s e) Hence draw a plot of the solutions, and identify the frontier port- Ldon to slar folios. it SOLUTION ods Btvni gatela dtPossible outcomes for three investment alternatives and their probabilities of occurrence are given next. Failure Acceptable Successful Alternative 1 Alternative 2 Alternative 3 Outcomes Probability Outcomes Probability Outcomes Probability 50 0.40 70 0.20 85 0.40 0.20 130 0.40 325 0.40 0.40 265 0.40 410 0.20 Alternative 1 Alternative 2 Alternative 3 80 135 Using the coefficient of variation, rank the three alternatives in terms of risk from lowest to highest. Note: Do not round intermediate calculations. Round your answers to 3 decimal places. Coefficient of Variation Rank
- Su 2 The standard deviation of return on investment A is 19%, while the standard deviation of return on investment B is 14%. If the covariance of returns on A and B is 0.004, the correlation coefficient between the returns on A and B is 00:05:46 臺 Mc Graw Hill Delivery co ler.QUESTION 5 Exhibit 6.15 USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) Asset (A) Asset (B) E(RA) = 14% E(RB) = 16% (σA) = 13% (σB) = 18% WA = 0.4 WB = 0.6 COVA,B = 0.0024 Refer to Exhibit 6.15. What is the expected return of a portfolio of two risky assets if the expected return E(Ri), standard deviation ( σ i ), covariance (COVi,j), and asset weight (Wi) are as shown above? a. 15.2% b. 13.8% c. 16.8% d. 14.6% e. 15.0%Computing Present and Future Values Under Different Assumptions Determine the unknown variables in each of the four separate investment scenarios. Round the RATE to one percentage point (for example, enter 8.5 for 8.54444%). Round NPER, PV, and PMT to the nearest whole number. Use a negative sign only for an amount related to PMT. Investment 1 Investment 2 Investment 3 Investment 4 RATE Answer 7% 6% 1% NPER 10 Answer 4 24 PV $216,000 $9,000 Answer $21,600 PMT $(35,000) $(2,300) $(16,200) Answer TYPE End of period Beg. of period End of period Beg. of period