Asked by
Michael Terrell
on Oct 14, 2024
Verified
Firm A sells lemonade and firm B sells hot chocolate.If you invest $100 if firm A, in one year you will get back $(30 T) where T is the average temperature (Fahrenheit) during the summer.If you invest $100 in firm B, in one year you will get back $(150 T) , where T is the average temperature during the summer.The expected value of T is 70 and the standard deviation of T is 10.If you invest $50 in firm A and $50 in firm B, what is the standard deviation of your return on your investment?
A) 10
B) 20
C) 5
D) 0
E) None of the above.
Average Temperature
The mean value of temperature taken over a specified period of time.
Standard Deviation
A statistical measure that quantifies the variation or dispersion of a set of data points or values from their mean (average).
Expected Value
The weighted average of all possible values of a random variable, with weights being their probabilities.
- Ascertain the projected income and standard risk measure of a portfolio.
- Investigate how the correlation among asset returns influences the variability in a portfolio's value.
Verified Answer
ZZ
Learning Objectives
- Ascertain the projected income and standard risk measure of a portfolio.
- Investigate how the correlation among asset returns influences the variability in a portfolio's value.