Business, 12.08.2020 04:01 KillerV

richard has two investment opportunities. He can invest in the sunglasses company or the umbrella company. if he diversifies his investment by putting 50% of his money into each company, what is the expected return and standard deviation of his portfolio

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Answer from: kimlyn58p0wyn0

Some information was missing, so i looked it up:

State of Prob. of the state Sunglasses Umbrella

the economy of the economy Company Corporation

Sunny .50 25% 0%

Rainy .50 0% 25%

expected returns:

Sunglasses Company = 0.5 x 25% = 12.5%

Umbrella Corporation = 0.5 x 25% = 12.5%,

so the expected return of the portfolio = (12.5% x 0.50) + (12.5% x 0.50) = 12.5%

standard deviation:

Sunglasses Company = √{[(0% - 12.5%)² + (25% - 12.5%)²] / 2} = √156.25 = 12.5%

Umbrella Corporation = √{[(0% - 12.5%)² + (25% - 12.5%)²] / 2} = √156.25 = 12.5%

so the standard deviation of the portfolio = 12.5%

Answer from: Quest

its kinda hard to answer this when we dont have all the information that we need.

Answer from: Quest

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