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FIN2601
ASSIGNMENT 2 SEMESTER 1 & 2 2022
UNIQUE NUMBER: 829061
DISCLAIMER: Extreme care has been used to create this document, however the contents are provided “as is” without any
representations or warranties, express or implied. This document is to be used for comparison, research and reference
purposes ONLY. Directly submitting and/or reselling/ distribution / reproduction any part of this document is not permitted.
PREVIEW OF QUESTION 1
1. 2 𝐸𝑥𝑝𝑒𝑐𝑡𝑒𝑑 𝑟𝑒𝑡𝑢𝑟𝑛 = ∑(𝑝𝑟𝑜𝑏𝑎𝑏𝑖𝑙𝑡𝑦 ∗ 𝑟𝑒𝑡𝑢𝑟𝑛)
𝐸𝑥𝑝𝑒𝑐𝑡𝑒𝑑 𝑟𝑒𝑡𝑢𝑟𝑛(𝑈𝑟𝑏𝑎𝑛 𝐹𝑜𝑜𝑑𝑖𝑒) = 0.20 ∗ −15% + 0.50 ∗ 20% + 0.30 ∗ 60% = 0.25
𝐸𝑥𝑝𝑒𝑐𝑡𝑒𝑑 𝑟𝑒𝑡𝑢𝑟𝑛(𝑊𝑖𝑐𝑘𝑒𝑑 𝐶ℎ𝑒𝑓) = 0.20 ∗ 20% + 0.50 ∗ 30% + 0.30 ∗ 40% = 0.31
𝐸𝑥𝑝𝑒𝑐𝑡𝑒𝑑 𝑟𝑒𝑡𝑢𝑟𝑛 𝑜𝑓 𝑎 𝑝𝑜𝑟𝑡𝑓𝑜𝑙𝑖𝑜 = 0.75 ∗ 0.25 + 0.25 ∗ 0.31 = 0.265 = 26.50%
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1. 2 𝐸𝑥𝑝𝑒𝑐𝑡𝑒𝑑 𝑟𝑒𝑡𝑢𝑟𝑛 = ∑(𝑝𝑟𝑜𝑏𝑎𝑏𝑖𝑙𝑡𝑦 ∗ 𝑟𝑒𝑡𝑢𝑟𝑛)
𝐸𝑥𝑝𝑒𝑐𝑡𝑒𝑑 𝑟𝑒𝑡𝑢𝑟𝑛(𝑈𝑟𝑏𝑎𝑛 𝐹𝑜𝑜𝑑𝑖𝑒) = 0.20 ∗ −15% + 0.50 ∗ 20% + 0.30 ∗ 60% = 0.25
𝐸𝑥𝑝𝑒𝑐𝑡𝑒𝑑 𝑟𝑒𝑡𝑢𝑟𝑛(𝑊𝑖𝑐𝑘𝑒𝑑 𝐶ℎ𝑒𝑓) = 0.20 ∗ 20% + 0.50 ∗ 30% + 0.30 ∗ 40% = 0.31
𝐸𝑥𝑝𝑒𝑐𝑡𝑒𝑑 𝑟𝑒𝑡𝑢𝑟𝑛 𝑜𝑓 𝑎 𝑝𝑜𝑟𝑡𝑓𝑜𝑙𝑖𝑜 = 0.75 ∗ 0.25 + 0.25 ∗ 0.31 = 0.265 = 26.50%
2. 3 The Range is the difference between the lowest and highest values
3. 1 𝜎
𝐶𝑜𝑒𝑓𝑓𝑖𝑐𝑖𝑒𝑛𝑡 𝑜𝑓 𝑣𝑎𝑟𝑖𝑎𝑡𝑖𝑜𝑛 =
𝜇
State of Rate of Expected
𝑟 − 𝐸(𝑟) 𝑝 𝑟 − 𝐸 𝑟
economy Probability return return
Strong 0,5 45% 0,225 0,16 0,01280
Normal 0,4 15% 0,0600 - 0,14 0,00784
Weak 0,1 5% 0,0050 - 0,24 0,00576
0,2900 0,02640
𝜎 = √0.02640 = 0,162480768
0.1625
𝐶𝑜𝑒𝑓𝑓𝑖𝑐𝑖𝑒𝑛𝑡 𝑜𝑓 𝑣𝑎𝑟𝑖𝑎𝑡𝑖𝑜𝑛 = = 0.56
0.29
4. 3 State of Rate of Expected
𝑟 − 𝐸(𝑟) 𝑝 𝑟 − 𝐸 𝑟
economy Probability return return
Weak 0,1 -14% -0,0140 - 0,20 0,00400
Below 0,2 -4% -0,0080 - 0,10 0,00200
Average 0,4 6% 0,0240 - 0,00000
Above 0,2 16% 0,0320 0,10 0,00200
Strong 0,1 26% 0,0260 0,20 0,00400
0,0600 0,01200
𝜎 = √0.012 = 0,109544512
5. 4 𝐶𝑜𝑚𝑝𝑎𝑛𝑦’𝑠 𝑏𝑒𝑡𝑎 = 30% ∗ 1.20 + 20% ∗ 0.80 + 15% ∗ 1.30 + 35% ∗ 0.60 = 0.9250
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FIN2601
ASSIGNMENT 2 SEMESTER 1 & 2 2022
UNIQUE NUMBER: 829061
DISCLAIMER: Extreme care has been used to create this document, however the contents are provided “as is” without any
representations or warranties, express or implied. This document is to be used for comparison, research and reference
purposes ONLY. Directly submitting and/or reselling/ distribution / reproduction any part of this document is not permitted.
PREVIEW OF QUESTION 1
1. 2 𝐸𝑥𝑝𝑒𝑐𝑡𝑒𝑑 𝑟𝑒𝑡𝑢𝑟𝑛 = ∑(𝑝𝑟𝑜𝑏𝑎𝑏𝑖𝑙𝑡𝑦 ∗ 𝑟𝑒𝑡𝑢𝑟𝑛)
𝐸𝑥𝑝𝑒𝑐𝑡𝑒𝑑 𝑟𝑒𝑡𝑢𝑟𝑛(𝑈𝑟𝑏𝑎𝑛 𝐹𝑜𝑜𝑑𝑖𝑒) = 0.20 ∗ −15% + 0.50 ∗ 20% + 0.30 ∗ 60% = 0.25
𝐸𝑥𝑝𝑒𝑐𝑡𝑒𝑑 𝑟𝑒𝑡𝑢𝑟𝑛(𝑊𝑖𝑐𝑘𝑒𝑑 𝐶ℎ𝑒𝑓) = 0.20 ∗ 20% + 0.50 ∗ 30% + 0.30 ∗ 40% = 0.31
𝐸𝑥𝑝𝑒𝑐𝑡𝑒𝑑 𝑟𝑒𝑡𝑢𝑟𝑛 𝑜𝑓 𝑎 𝑝𝑜𝑟𝑡𝑓𝑜𝑙𝑖𝑜 = 0.75 ∗ 0.25 + 0.25 ∗ 0.31 = 0.265 = 26.50%
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1. 2 𝐸𝑥𝑝𝑒𝑐𝑡𝑒𝑑 𝑟𝑒𝑡𝑢𝑟𝑛 = ∑(𝑝𝑟𝑜𝑏𝑎𝑏𝑖𝑙𝑡𝑦 ∗ 𝑟𝑒𝑡𝑢𝑟𝑛)
𝐸𝑥𝑝𝑒𝑐𝑡𝑒𝑑 𝑟𝑒𝑡𝑢𝑟𝑛(𝑈𝑟𝑏𝑎𝑛 𝐹𝑜𝑜𝑑𝑖𝑒) = 0.20 ∗ −15% + 0.50 ∗ 20% + 0.30 ∗ 60% = 0.25
𝐸𝑥𝑝𝑒𝑐𝑡𝑒𝑑 𝑟𝑒𝑡𝑢𝑟𝑛(𝑊𝑖𝑐𝑘𝑒𝑑 𝐶ℎ𝑒𝑓) = 0.20 ∗ 20% + 0.50 ∗ 30% + 0.30 ∗ 40% = 0.31
𝐸𝑥𝑝𝑒𝑐𝑡𝑒𝑑 𝑟𝑒𝑡𝑢𝑟𝑛 𝑜𝑓 𝑎 𝑝𝑜𝑟𝑡𝑓𝑜𝑙𝑖𝑜 = 0.75 ∗ 0.25 + 0.25 ∗ 0.31 = 0.265 = 26.50%
2. 3 The Range is the difference between the lowest and highest values
3. 1 𝜎
𝐶𝑜𝑒𝑓𝑓𝑖𝑐𝑖𝑒𝑛𝑡 𝑜𝑓 𝑣𝑎𝑟𝑖𝑎𝑡𝑖𝑜𝑛 =
𝜇
State of Rate of Expected
𝑟 − 𝐸(𝑟) 𝑝 𝑟 − 𝐸 𝑟
economy Probability return return
Strong 0,5 45% 0,225 0,16 0,01280
Normal 0,4 15% 0,0600 - 0,14 0,00784
Weak 0,1 5% 0,0050 - 0,24 0,00576
0,2900 0,02640
𝜎 = √0.02640 = 0,162480768
0.1625
𝐶𝑜𝑒𝑓𝑓𝑖𝑐𝑖𝑒𝑛𝑡 𝑜𝑓 𝑣𝑎𝑟𝑖𝑎𝑡𝑖𝑜𝑛 = = 0.56
0.29
4. 3 State of Rate of Expected
𝑟 − 𝐸(𝑟) 𝑝 𝑟 − 𝐸 𝑟
economy Probability return return
Weak 0,1 -14% -0,0140 - 0,20 0,00400
Below 0,2 -4% -0,0080 - 0,10 0,00200
Average 0,4 6% 0,0240 - 0,00000
Above 0,2 16% 0,0320 0,10 0,00200
Strong 0,1 26% 0,0260 0,20 0,00400
0,0600 0,01200
𝜎 = √0.012 = 0,109544512
5. 4 𝐶𝑜𝑚𝑝𝑎𝑛𝑦’𝑠 𝑏𝑒𝑡𝑎 = 30% ∗ 1.20 + 20% ∗ 0.80 + 15% ∗ 1.30 + 35% ∗ 0.60 = 0.9250
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