Compute the mean and standard deviation

Assignment Help Macroeconomics

Reference no: EM131444052

Question: Suppose you have some money to invest-for simplicity, $1-and you are planning to put a fraction w into a stock market mutual fund and the rest, 1- w, into a bond mutual fund. Suppose that $1 invested in a stock fund yields Rs after 1 year and that $1 invested in a bond fund yields Rb, suppose that Rs is random with mean 0.08 (8%) and standard deviation 0.07, and suppose that Rb is random with mean 0.05 (5%) and standard deviation 0.04.The correlation between Rs and Rb is 0.25. If you place a fraction w of your money in the stock fund and the rest, 1 - w, in the bond fund, then the return on your investment is Rs = wRs + (1- w)Rb.

a. Suppose that w = 0.5. Compute the mean and standard deviation of R.

b. Suppose that w = 0.75. Compute the mean and standard deviation of R.

c. What value of w makes the mean of R as large as possible? What is the standard deviation of R for this value of w?

d. (Harder) What is the value of w that minimizes the standard deviation of R? (Show using a graph. algebra, or calculus.)

Reference no: EM131444052

Questions Cloud

Research the labor relations environment in germany : Research the labor relations environment in Germany. How does their "system" of conducting LR compare to ours?

Context of your chosen management problem or issue : Within the context of your chosen management problem or issue, compose a document telling about your methodology. Label this section "Methods."

Develop an interview plan : As a human resource manager for a 300-employee insurance organization, develop an interview plan in which you determine which types of interviews will be used in the organization. Address the following in your plan:

Determine the rated power output of turbine : Determine the rated power output of turbine and What percentage increase in overall cost do you think can be justified based on the increased power generation? Explain your reasoning.

Compute the mean and standard deviation : Suppose you have some money to invest-for simplicity, $1-and you are planning to put a fraction w into a stock market mutual fund and the rest, 1- w, into a bond mutual fund.

Show the random variables : This exercise provides an example of a pair of random variables X and Y for which the conditional mean of Y given X depends on X but corr(X, Y) = 0. Let X and Z be two independently distributed standard normal random variables, and let Y = X2 + Z.

Change management plan : In this assignment, you will combine the previous four (4) assignments into a proposal that you could present to the executive leadership and board members. You will argue the value of the change management plan to the overall success of the organ..

Compute the given probabilities : Compute the following probabilities.

Employees in the field of governmental projects : For a medium sized company of around 150 employees in the field of governmental projects, international business development, marketing and sales. Located in Egypt with operations in other middle east countries.

User Account

All Pages