Question

I am working through review problems and was stuck on this question, could you please guide...

I am working through review problems and was stuck on this question, could you please guide me on how to approach this type of problem? Thank you!

You are investing your money in two hedge funds and want to split your cash among two funds, Fund A and Fund B. If you invest $x dollars in Fund A, its worth after one year is distributed as a Normal (µA = 1.05x, σA2 = .02x2 ). If instead you invest $x dollars in Fund B, its worth after one year is distributed as a Normal (µB = 1.05x, σB2 = .03x2 ). Suppose you invest $p in Fund A and $(100 - p) in Fund B where p ∈ [0, 100] and both funds are independent.

(a) What is the expected value of the total worth of your investment after one year?

(b) What is the variance of the total worth of your investment after one year?

(c) What is the value of p which minimizes the variance of the total worth of your investment after one year? (d) If you adopt the value of p you determined in part (c), what is the probability that after one year the total worth of your investment is more than $120?

Homework Answers

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
I was stuck on the following review problem on variance and expected value. Could you please...
I was stuck on the following review problem on variance and expected value. Could you please guide me on how to approach this type of problem? Thank you! You are investing your money in two hedge funds and want to split your cash among two funds, Fund A and Fund B. If you invest $x dollars in Fund A, its worth after one year is distributed as a Normal (µA = 1.05x, σA2 = .02x2 ). If instead you invest...
I was stuck on the following review problem on variance and expected value. Could you please...
I was stuck on the following review problem on variance and expected value. Could you please guide me on how to approach this type of problem? Thank you! EDIT: x is just some variable representing the amount invested, so distribution depends on this value. You are investing your money in two hedge funds and want to split your cash among two funds, Fund A and Fund B. If you invest $x dollars in Fund A, its worth after one year...
Hello if you could please show work for the problems and show the necessary r code...
Hello if you could please show work for the problems and show the necessary r code for questions b and c I would appreciate it. Thank you A shoe manufacturer compared material A and material B for the soles of shoes. Twelve volunteers each got two shoes. The left was made with material A and the right with material B. On both shoes, the material was 1 inch thick. Volunteers used the shoes normally for two months and returned them...
I- (6 pts) Suppose you have some money to invest-for simplicity, $1-and are planning to put...
I- (6 pts) Suppose you have some money to invest-for simplicity, $1-and are planning to put a fraction into a stock market mutual fund and the rest ( ), into a bond mutual fund. Suppose that a $1 invested in a stock fund yields ??after one year and a $1 invested in a bond fund yields . ?? and are random variables with expected value of 9% and 6% respectively, and standard deviation of 5% and 3% respectively. The correlation...
Suppose you think Tesla stock is going to appreciate substantially in value in the next year....
Suppose you think Tesla stock is going to appreciate substantially in value in the next year. Say the stock’s current price, S, is $400, and a call option expiring in one year has an exercise price, X, of $390 and is selling at a price, C, of $40. With $40,000 to invest, you are considering three investment alternatives. Alternative A: Invest all $40,000 in the stock, buying 100 shares. Alternative B: Invest all $40,000 in 1,000 options (10 contracts). Alternative...
A. You have $21,000 to invest. You could purchase shares in one mutual fund or try...
A. You have $21,000 to invest. You could purchase shares in one mutual fund or try to diversify on your own. From your investment class you learn that you need to hold at least 25 different securities in an equal weighted portfolio to achieve a reasonably well diversified portfolio. If you pay an average commission of 3% of the dollar value of the stock you buy you will have to pay ______ in commissions per stock for a total commission...
I've answered questions 1-4 (answers are bolded) but I am stuck on 5 and 6. Any...
I've answered questions 1-4 (answers are bolded) but I am stuck on 5 and 6. Any help is appreciated. Thank you Assume i=10% 1. Today (t=0) your daughter is born (congratulations and good luck with that!) and you decide to start saving for her education. You figure that you will need to pay for 5 years of undergraduate engineering at $20,000 per year (from t=18 through t=22), and two years for graduate school at $30,000 per year (t=23 and t=24)....
Could you explain to how to find these answers in excel as well please? I am...
Could you explain to how to find these answers in excel as well please? I am having a terrible time trying to get it to work correctly for me. You are the manager of a restaurant for a​ fast-food franchise. Last​ month, the mean waiting time at the​ drive-through window for branches in your geographical​ region, as measured from the time a customer places an order until the time the customer receives the​ order, was 3.7 minutes. You select a...
Suppose that you wish to invest in two stocks which both have a current price of...
Suppose that you wish to invest in two stocks which both have a current price of $1. The values of these two stocks in one month are described by two random variables, say, X1 and X2. Suppose that the expected values and standard deviation of X1 and X2 are μ1, μ2, σ1 and σ2, respectively. We also assume that the correlation between the stocks is given by ρ. Let c denote your initial investment, which is to be invested in...
Assume that you will retire in 30 years. You plan to be retired for a total...
Assume that you will retire in 30 years. You plan to be retired for a total of 30 years. You wish to withdraw the equivalent of $50,000 per year (in TODAY'S dollars) from your retirement fund each year that you are retired (ASSUME that there will NOT be any adjustments for inflation DURING your retirement. You will withdraw the same dollar amount every year that you are retired). The expected inflation rate for the next 30 years is 3%. You...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT