Find the expected value (mean) and variance of portfolio

Assignment Help Applied Statistics

Reference no: EM13966411

Suppose that the return, labelled r, on a domestic bond can take on the followingvalues, with these probabilities:

r: 2, 3, 4

Prob: 0.4, 0.3, 0.3

(a) Find the expected value or mean (μr) and variance (σ2r ) of r.

(b) A foreign bond has a return, labelled r∗, with mean 2 and variance 2. The covariancebetween the two returns, r and r∗, is 1. Suppose investors hold 75% of their portfolios in the domestic bond and 25% in the foreign bond. Find the expected value (mean) and variance of the portfolio return.

Reference no: EM13966411

Questions Cloud

Determine the number of teeth on gear 3 : Two spur gears are in mesh. Driven gear 3 has a magnitude of rotational speed that is one half that of the driver gear 2. Gear two rotates at 500 rpm , has a module of 3 mm and has 48 teeth. Determine 1) The number of teeth on gear 3, 2) The magni..

Examine and explain security strategies used for firewalls : Examine and explain four security strategies used for firewalls. Explain the two that you would highly recommend being implemented

Difference between population mean : Calculate a 90% confidence interval for the difference between population mean extent of lateral motion for the two conditions. Does the interval suggest that population mean lateral motion differs for the two conditions? Is the message different ..

Which stages do you have the most trouble with : Writing is a process. Describe your own writing process, from start (receiving an assignment) to finish (turning in or revising an assignment). Which stages do you have the most trouble with?

Find the expected value (mean) and variance of portfolio : A foreign bond has a return, labelled r∗, with mean 2 and variance 2. The covariancebetween the two returns, r and r∗, is 1. Suppose investors hold 75% of their portfolios in the domestic bond and 25% in the foreign bond. Find the expected value (mea..

Express the force from the ramp as a vector : A frictionless ramp connects A at (3m, 5m) to B at (12m, 17m). The ramp pushes a block with a force of 50N normal to the ramp surface. Express the force from the ramp as a vector *F (ignore the other forces that also act on the block holding it in..

Write a paper about big data : A 2 pages paper about " Big Data" you have to write it in your own words so it not that hard i just don't have time for it.

How are the large losses related to fixed costs : Expand on Johns thought. How are the large losses related to fixed costs? Identify a way that John can turn potential fixed costs into variable costs.

Estimate a number of gallons for this qs at price $10 : On your graph label on the horizontal axis the equilibrium quantity of milk to be 2,000 gallons and label on the vertical axis the equilibrium price to be $10 per gallon.

User Account

All Pages