In reviewing retirement portfolios, Kim determined the probability of a client owning stock is 0.50 and the probability of owning a bond is 0.40. If a client already has stocks in their portfolio, the probability that they own bonds is 0.50%. What is the probability a client owns both securities in their retirement portfolio?

In reviewing retirement portfolios, Kim determined the probability of a client owning stock is 0.50 and the probability of owning a bond is 0.40. If a client already has stocks in their portfolio, the probability that they own bonds is 0.50%. What is the probability a client owns both securities in their retirement portfolio?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter8: Analysis Of Risk And Return

Section: Chapter Questions

Problem 6P

See similar textbooks

Similar questions

1.Do the stock and bond investments fall within Stephanie’s investment guidelines? Show appropriate computations in support of your response. 2. Will Stephanie have enough funds for her investment in stocks and bonds, when needed? What will be the surplus / shortfall, if any?
An investor seeking to invest in one of these three alternatives: Islamic mutual funds, ETFs or REITS. (a) if he wants stable returns and needs annual income, what would you recommend to the investor? Justify (b) If the investor interested. capital gains, what would you recommend?
Darren has the option of investing in either Stock A or Stock B. The probability of the return of Stock A being 25% is 0.45, 14% is 0.25, and 4% is 0.30. The probability of the return of Stock B being 30% is 0.30, 9% is 0.25, and 2% is 0.30. Given the probability distributions for the two investments, what is the expected rate of return for Stock A and Stock B? a. 13.65%; 12.85% b. 14.75%; 13.75% c. 15.95%; 11.85% d. 16.80%; 11.45% e. 17.82%; 11.95%
Suppose Megan is choosing how to allocate her portfolio between two asset classes: risk-free government bonds and a risky group of diversified stocks. The following table shows the risk and return associated with different combinations of stocks and bonds. As the risk of Megan's portfolio increases, the average annual return on her portfolio .Suppose Megan currently allocates 25% of her portfolio to a diversified group of stocks and 75% of her portfolio to risk-free bonds; that is, she chooses combination B. She wants to increase the average annual return on her portfolio from 3% to 7%. In order to do so, she must do which of the following? Check all that apply. Sell some of her stocks and place the proceeds in a savings accountAccept more riskSell some of her bonds and use the proceeds to purchase stocksSell some of her stocks and use the proceeds to purchase bondsThe table uses the standard deviation of the portfolio's return as a measure of risk. A normal random variable, such as a…
Christy is considering investing in the common stock of One Liberty and Heico. The following data are available for these two securities: One Liberty Heico Expected return 0.12 0.16 Standard deviation of returns 0.08 0.20 If she invests 30% of her funds in Heico and 70% in One Liberty, and if the correlation of returns between these securities is +0.65, what is the portfolio's expected return and standard deviation?
Sarafina has bonds in her portfolio. She wants to know about her position in the bond market. Specifically, when dealing with the bond market, will she fare better when the yield to maturity increases or when it decreases? As such, her portfolio manager would tell her that bondholders fare better when the yield to maturity: O A. increases, since this represents a decrease in the bond maturity and a decrease in potential capital losses. O B. decreases, since this represents an increase in the price of the bond and a decrease in potential capital losses. O C. increases, since this represents a decrease in the price of the bond and an increase in potential capital gains. O D. decreases, since this represents an increase in the coupon payment and an increase in potential capital gains.
With all investments, there are an expected percentage return and certain types of return that can be expected. Describe the possible forms in which a return could be received for bonds, common stock, and preferred stock. Justify your answer
Would a market-neutral hedge fund be a good candidate for an investor’s entire retirement portfolio? If not, would there be a role for the hedge fund in the overall portfolio of such an investor?
After learning the course, you divide your portfolio into three equal parts (i.e., equal market value weights), with one part in Treasury bills, one part in a market index, and one part in a mutual fund with beta of 0.77. What is the beta of your overall portfolio?
Mary owns a risky stock and anticipates earning 16.5 percent on her investment in that stock. Which one of the following best describes the 16.5 percent rate? Select one: A. Market rate B. Expected return C. Systematic return D. Real return
Suppose Caroline is choosing how to allocate her portfolio between two asset classes: risk-free government bonds and a risky group of diversified stocks. The following table shows the risk and return associated with different combinations of stocks and bonds. There is a relationship between the risk of Caroline's portfolio and its average annual return.Suppose Caroline currently allocates 75% of her portfolio to a diversified group of stocks and 25% of her portfolio to risk-free bonds; that is, she chooses combination D. She wants to reduce the level of risk associated with her portfolio from a standard deviation of 15 to a standard deviation of 5. In order to do so, she must do which of the following? Check all that apply. Sell some of her stocks and use the proceeds to purchase bondsSell some of her bonds and use the proceeds to purchase stocksPlace the entirety of her portfolio in bondsAccept a lower average annual rate of returnThe table uses the standard deviation of the…
After learning the course, you divide your portfolio into three equal parts (i. e.. equal market value weights), with one part in Treasury bills, one part in a market index, and one part in a mutual fund with beta of 1.32. What is the beta of your overall portfolio?