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The financial manager of Blackbelt Technologies wishes to determine the standard deviation from a proposed investment project. The expected returns from the project are related to the future performance of the economy over the period as follows:
Economic scenario
|
Probability of occurrence
|
Rate of return
|
Strong growth
|
0,25
|
15%
|
Moderate growth
|
0,50
|
12%
|
Low growth
|
0,25
|
8%
|
What is the standard deviation of the proposed investment project?
Your grandmother's portfolio is structured with 40% of her funds allocated to Transatlantic Transaction and the remaining 60% invested in Treasury Bills. This allocation strategy reflects a balance between potential returns and risk mitigation, aligning with her investment objectives and risk tolerance. The investment broker overseeing your grandmother's portfolio has furnished pertinent details to help in strategic decision-making:
Portfolio
|
Probability
|
Possible return
|
Transatlantic Transaction
|
0,6
0,3
0,1
|
–20%
15%
30%
|
Moderated Mediums
|
0,6
0,3
0,1
|
14%
12%
30%
|
You are required to calculate the expected return of your grandmother's portfolio.
Le Panier French Bakery, a cupcake business, has recorded the following returns over the last four years:
Year
|
Return
|
2021
|
3,5%
|
2022
|
5,0%
|
2023
|
65%
|
2024
|
13,7%
|
What is the average return on the company’s shares?
Tom Noel holds the following portfolio:
Share
|
Investment
|
Beta
|
Class A share
|
R35 000
|
0,95
|
Class B share
|
R65 000
|
0,80
|
Class C share
|
R50 000
|
1,00
|
Class D share
|
R200 000
|
1,20
|
What is the portfolio beta?
Tiny Legend Learning Academy believes the probability distribution shown below holds true for its shares.
State of the economy
|
Probability of state occurring
|
Shares expected return
|
Strong growth
|
0,25
|
20%
|
Moderate growth
|
0,50
|
12%
|
Low growth
|
0,25
|
8%
|
What is the coefficient of variation on the corporation shares?
An asset moves in the same direction as the market while being twice as responsive as the market. If the risk-free rate of return is 8% and the market return is 11%, what would the required return on the asset be?
A company has the opportunity to invest in one of three possible investments. The financial analysts predict the following possible outcomes for the three investments:
Outcome
|
Probability
|
Investment C:
Expected return
|
Investment D:
Expected return
|
Investment E:
Expected return
|
Pessimistic
|
30%
|
2%
|
8%
|
6%
|
Most likely
|
40%
|
10%
|
10%
|
8%
|
Optimistic
|
30%
|
18%
|
12%
|
11%
|
Calculate the range of returns for the three investments.