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  3. assume that an individual can either invest all of

Assume that an individual can either invest all of his resources in one of the...

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Accounting

Assume that an individual can either invest all of his resources in one of the two securities, A or B; or, alternatively, he can diversify his investment between the two. The distributions of the returns are as follows:

Security A Security B

Return Probability Return Probability

-10 1/2 -20 1/2

50 1/2 60 1/2

Assume that the correlation between the returns from the two securities is zero, and answer the following questions:

Calculate each security's expected return, variance and standard deviation.

Calculate the probability distribution of the returns on a mixed portfolio comprised of equal proportions of securities A and B. Also calculate the portfolio's expected return, variance and standard deviation.

Calculate the expected return and the variance of a mixed portfolio comprised of 75% of security A and 25% of security B.

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