The following questions are based on the given information from table of probability distributions of returns on investment individual shares and portfolio below: Table 3: Probability distributions of returns on investment for individual shares and portfolio. State of Economy Probability of the States Return on Share A (rA) Return on Share B (rB) Return on Portfolio AB (rAB) 1 0.20 15% -5% 5% 2 0.20 -5% 15% 5% 3 0.20 5% 25% 15% 4 0.20 35% 5% 20% 5 0.20 25% 35% 30% Given: By using the above information, demonstrate the rate of risk (variance and standard deviation) for each of: (i) Share A (ii) Share B (iii) Portfolio A and B
The following questions are based on the given information from table of probability distributions of returns on investment individual shares and portfolio below: Table 3: Probability distributions of returns on investment for individual shares and portfolio. State of Economy Probability of the States Return on Share A (rA) Return on Share B (rB) Return on Portfolio AB (rAB) 1 0.20 15% -5% 5% 2 0.20 -5% 15% 5% 3 0.20 5% 25% 15% 4 0.20 35% 5% 20% 5 0.20 25% 35% 30% Given: By using the above information, demonstrate the rate of risk (variance and standard deviation) for each of: (i) Share A (ii) Share B (iii) Portfolio A and B
Chapter6: Risk And Return
Section: Chapter Questions
Problem 1Q
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Question
The following questions are based on the given information from table of probability
distributions of
Table 3: Probability distributions of returns on investment for individual shares and
portfolio.
State of
Economy
Probability
of the
States
Return on
Share A
(rA)
Return on
Share B
(rB)
Return on Portfolio AB
(rAB)
1 0.20 15% -5% 5%
2 0.20 -5% 15% 5%
3 0.20 5% 25% 15%
4 0.20 35% 5% 20%
5 0.20 25% 35% 30%
Given:
By using the above information, demonstrate the rate of risk (variance and standard
deviation) for each of:
(i) Share A
(ii) Share B
(iii) Portfolio A and B
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