Score: 0 of 3 pts 3 of 5 (0 complete) HW Score: 0%, 0 of 15 pts 5.2.11 :Question

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Score: 0 of 3 pts 3 of 5 (0 complete) HW Score: 0%, 0 of 15 pts 5.2.11 :Question Help Suppose that you are deciding between two different investments for the coming year. The first investment is a mutual fund that consists of the stocks that comprise the Dow Jones Industrial Average. The second investment is a mutual fund that is expected to perform best when the economy is weak. Let X be the variable that corresponds to the Dow Jones fund and Y be the variable that corresponds to the weak-economy fund. The expected values and the variances for each variable and the covariance are calculated and the results are shown below. E(X): $85. E(Y): $45, -24, 525, 54, 225, ,--30 825 When half of the portfolio assets are invested in the Dow Jones fund and half in a weak-economy fund, the portfolio expected return is found to be $65 and the portfolio risk is found to be $65.38. Complete parts (a) through (c) below. Click the icon to view the table that summarizes the estimate of returns a Recalculate the portfolio expected retum and the portfolio risk if 30% of the portfolio assets are invested in the Dow Jones fund and 70% in a weak economy fund The portfolio expected return is E(P): (Type an integer or a decimal )

Explanation / Answer

expected return =0.3*85+0.7*45

= 57

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