Compute the mean of the returns

Reference no: EM131477229

Question: John and Mary are considering investing in a combination of ABC stock and XYZ stock. The return on ABC is determined by a coin flip: If the coin is heads, the return is 35% and if the coin is tails, the return on ABC is 10%. The return on XYZ stock is similarly determined, but by a separate coin flip.

a. Compute the mean, variance and standard deviation of the returns on ABC and XYZ.

b. What is the correlation of the returns? (Nothing to compute here, just think!)

c. John has decided to invest in a portfolio composed of 100% XYZ stock. Mary, on the other hand, is investing in a portfolio composed of 50% ABC and 50% XYZ. Whose portfolio is better? Why?

Reference no: EM131477229

Questions Cloud

True regarding layout decisions : The requirements of work cells do NOT include. Which of the following is NOT true regarding layout decisions?

What is monopolistic competition : HSPM 712 Health Economics Final Examination. What is "monopolistic competition"? Why do we consider physician care market as monopolistic competition

Concept of a lost continent : From which ancient sources did the concept of a "lost continent" of Atlantis originally derive? What reasons are there for questioning the historical accuracy.

Examine the major disadvantages of cloud computing : Many organizations have now adopted or begun to offer cloud computing. Examine advantages and disadvantages of cloud computing for two selected organizations.

Compute the mean of the returns : John and Mary are considering investing in a combination of ABC stock and XYZ stock. The return on ABC is determined by a coin flip: If the coin is heads.

He would tend to be rated as low on which of these factors : If Ben is tense, nervous, depressed and insecure, he would tend to be rated as low on which of these factors?

Collective implications to the contemporary healthcare : about these factors and their individual and collective implications to the contemporary healthcare marketplace.

What is the correlation of the returns : Elizabeth and Sandra are considering investing in a combination of ABC stock and XYZ stock. The return on both stocks is determined by a single coin flip.

Para-phrasing involves : "Para-phrasing" involves. An argument, regardless of length, should have all the following EXCEPT

User Account

All Pages