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Calculate the expected return and standard deviation of a portfolio half invested in Escapist and half in Leaning Tower of Pita. (Do not round your intermediate calculations and round your final answers to 2 decimal places. Use the minus sign for negative numbers if it is necessary.)   Expected return of portfolio % Standard deviation of portfolio %   Why is the portfolio standard deviation lower than for either stock’s individually?

Calculate the expected return and standard deviation of a portfolio half invested in Escapist and half in Leaning Tower of Pita. (Do not round your intermediate calculations and round your final answers to 2 decimal places. Use the minus sign for negative numbers if it is necessary.)   Expected return of portfolio % Standard deviation of portfolio %   Why is the portfolio standard deviation lower than for either stock’s individually?

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Calculate the expected return and standard deviation of a portfolio half invested in Escapist and half in Leaning Tower of Pita. (Do not round your intermediate calculations and round your final answers to 2 decimal places. Use the minus sign for negative numbers if it is necessary.)

 

Expected return of portfolio % Standard deviation of portfolio %

 

Why is the portfolio standard deviation lower than for either stock’s individually?

The common stock of Escapist Films sells for $30 a share and offers the following payoffs next year: Dividend Probability 0.3 $0 0.5 3 0.2 Boom Normal economy Recession standard deviation Calculate the expected return and standard deviation of Escapist. (Do not round your Intermediate calculations and round your final answers to 2 decimal places. Use the minus sign for negative numbers if it is necessary.) Expected rate of return Boom Normal economy Recession 27.81 % 8 The common stock of Leaning Tower of Pita, Inc., a restaurant chain, will generate the following payoffs to investors next year: Probability 0.3 Stock Price $200 0.5 105 0.2 the variations ✔ Stock Price $23 31 39 % Dividend $5 3 The stock is selling today for $95. Calculate the expected return and standard deviation of a portfolio half Invested in Escapist and half In Leaning Tower of Pita. (Do not round your Intermediate calculations and round your final answers to 2 decimal places. Use the minus sign for negative numbers If It is necessary.) Expected return of portfolio standard deviation of portfolio 8 Why is the portfolio standard deviation lower than for either stock's Individually? The portfolio standard deviation is lower than for either stock's Individually because < Prev 3 of 3 www Next >
Transcribed Image Text:The common stock of Escapist Films sells for $30 a share and offers the following payoffs next year: Dividend Probability 0.3 $0 0.5 3 0.2 Boom Normal economy Recession standard deviation Calculate the expected return and standard deviation of Escapist. (Do not round your Intermediate calculations and round your final answers to 2 decimal places. Use the minus sign for negative numbers if it is necessary.) Expected rate of return Boom Normal economy Recession 27.81 % 8 The common stock of Leaning Tower of Pita, Inc., a restaurant chain, will generate the following payoffs to investors next year: Probability 0.3 Stock Price $200 0.5 105 0.2 the variations ✔ Stock Price $23 31 39 % Dividend $5 3 The stock is selling today for $95. Calculate the expected return and standard deviation of a portfolio half Invested in Escapist and half In Leaning Tower of Pita. (Do not round your Intermediate calculations and round your final answers to 2 decimal places. Use the minus sign for negative numbers If It is necessary.) Expected return of portfolio standard deviation of portfolio 8 Why is the portfolio standard deviation lower than for either stock's Individually? The portfolio standard deviation is lower than for either stock's Individually because < Prev 3 of 3 www Next >
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