From the information generated in the previous two questions;a) Identify two investment alternatives that can be combined in a portfolio. Assume a 50-50 investment allocation in each investment alternative b) Compute the expected return of the portfolio thus formed c) Compute the portfolio’s beta. Is the portfolio aggressive or defensive? State of the EconomyRecessionBelow AverageAverageConsider the following information about the various states of economy and the returns ofvarious investment alternatives for each scenario. Answer the questions that follow.Above AverageBoomMeanStandard Deviation2 / 3Coefficient of VariationCovariance with MPCorrelation with Market IndexBetaCAPM Req. ReturnValuation(Overvalued/Undervalued/FairlyValued)-Nature of stock(Aggressive/Defensive)Probability0.20.10.3100% +0.30.1% Return on T-Bills, Stocks and MarketIndexT-Bills77777Phillips-22-2203550Pay-up2814.70-10-20Rubber-made10-1074530MarketIndex-131152943

From the information generated in the previous two questions; a) Identify two investment alternatives that can be combined in a portfolio. Assume a 50-50 investment allocation in each investment alternative b) Compute the expected return of the portfolio thus formed c) Compute the portfolio’s beta. Is the portfolio aggressive or defensive?

From the information generated in the previous two questions; a) Identify two investment alternatives that can be combined in a portfolio. Assume a 50-50 investment allocation in each investment alternative b) Compute the expected return of the portfolio thus formed c) Compute the portfolio’s beta. Is the portfolio aggressive or defensive?

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter2: Mathematics For Microeconomics

Section: Chapter Questions

Problem 2.16P

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