OPINION ANSWER FOR MODULE 7.1

| November 18, 2015

1a)Giventhe following,calculatetheportfolio’sexpected return, variance,andstandarddeviation.

 

Investment E(R) StdDev Weight CorrelationCoefficient
A 0.05 0.07 0.50 0.7
B 0.09 0.07 0.50  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Assumethefollowingchangesoccur.

 

Investment E(R ) StdDev Weight CorrelationCoefficient
A 0.05 0.06 0.472 0.8
B 0.09 0.075 0.528  

 

 

1b)As aMarkowitz-efficientinvestor, whichportfoliowouldyouprefer,theoriginalportfolioorthisportfolio,andwhy?

 

1c)Oncethesechanges occur, is this portfolionowriskless?Explain.

 

2)Youhaveaportfolioof twoassets, onewith anexpected returnof10%andastandarddeviationof returnof9%,theotherwithanexpectedreturnof 10%andastandarddeviationofreturnof 8%. Together,theyhaveacovarianceof-.0072. Theyareequally weighted intheportfolio.

Terrence Sawyer 

 

2 posts

Re:Module 7 DQ 1

Consider the following news headline, “Cigarette Smokers Make Lower College Grades than Nonsmokers” The news article goes on to say that researchers at a university collected information on rate of cigarette smoking (total number of cigarettes smoked in a one month period) and the college student’s current GPA for completed college courses. They found that those with higher levels of cigarette use had lower GPAs, and vice versa. What can you rightfully conclude from this? Why? Be specific about what this kind of information may indicate and mean.

 

In view of a headline depicting, “Cigarette Smokers Make Lower College Grades than Nonsmokers” would first raise questions on the factors utilized in this correlational study? How were the factors inferred in dichotomous hypothesis testing? The correlational study utilizing quantitative statistical testing such as the Pearson correlation would suggest merit giving Intermediate values between 0 and 1 to indicate the degree of consistency Gravetter&Wallnau, 2010). Studies that measure degree of consistency will promote the idea of the relationship effect of one to the other (Gravetter&Wallnau, 2010). Studies do report performance advantages in favor of smokers, while others report no differences between smokers and nonsmokers (Hill, et al, 2003).   Empirical literature does propose that cigarette smoking is associated with poorer performance on those tasks that are cognitively demanding (Hill, et al, 2003).   The information given in the study can create inference that supports the cognitive ability affect is reflected with lower grades as a result of increased cigarette smoking, this could not be a summation, yet more of a generalization (Hill, et al, 2003).  ANCOVA procedure with partial correlation examination gives meaning to summative conclusion that Smoking is associated with poorer cognitive performance (Hill, et al, 2003).

 

Reference

Gravetter, F. J., &Wallnau, L. B. (2010). Statistics for the behavioral sciences (9th ed.). Belmont, CA: Wadsworth Cengage Learning.

 

Hill, R., Nilsson, L, Nyberg, L., &Backman, (2003) Cigarette smoking and cognitive performance in healthy Swedish adults.  Age and Ageing Vol. 32 No. 5 British Geriatrics Society. Retrieved from http://ageing.oxfordjournals.org/content/32/5/548.full.pdf

 

Is itpossible tocreatea risklessportfolioundertheseconditions.Why?Beasthoroughaspossible.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3a)InCapitalMarketTheory, whatistheriskmeasurefor anindividual investment?

3b)Whyisthis so?

 

5)InCapitalMarketTheory, weassumed no transactions costs,whichseemed unrealistic.However, thereareinstanceswhere thisassumptionisnotcompletelyinvalid. Onesuchcaseis residential real estate,whereonlythesellertypicallypays acommissionforatransaction. Assumethe risk-freerateis

6%,salescommissions are3%, andthe SMLis apositively-sloped line(i.e. normal). Inwords, graphs,orboth, explainhowthistypeof commissionwouldalterthe SMLandthe pricingofresidentialreal estate assets

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A simple random sample of 700 individuals provides 150 Yes responses
a)Giventhe following,calculatetheportfolio’sexpected return, variance,andstandarddeviation.

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