1) Given following probability distribution for assets x and y, calculate expected rate of return, variance, standard deviation, and coefficient of variation for two assets. Which asset is a better investment?
X Y
Return Probability Return Probability
8% .10 10% .25
9% . 20 11% .35
11% . 30 12% .40
12% .40
2) You are going to invest= $20,000 in portfolio consisting of assets x, y, z, as follows:
Asset Annual Return Probability Beta Proportion
X 10% .50 1.2 .33333
Y 8% .25 1.6 .33333
Z 16% .25 2.0 .33333
a) Giving the information in the above table, what is the expected annual return of this portfolio?
b) Determine the beta of this portfolio?
3) Dr. Ray is considering investment in the project with beta coefficient of= 1.75. What would you suggest him to do if this investment has= 11.5% rate of return, risk free rate is= 5.5%, and rate of return on market portfolio of assets is= 8.5 %?
4) Asset Y has a beta of= 1.2. Risk free rate of return is 6%, whereas the return on market portfolio is 12%. Assets market risk premium is?
5) Supposing a risk-free rate of= 8% and market return of= 12%, would wise investor obtain security with beta of 1.5 and a rate of return of= 14% given facts above?