Managerial accounting Assignment.

Managerial accounting
Assignment
[DATE]
STUDENT ID
STUDENT NAME

Question 4
Portfolio expected return = $10,000
Expected return of stock X = 11.5%
Expected return of stock Y = 9.4%
Expected return portfolio = 10.85%
Money invest in stock X and stock Y =?
Weight of stock X is Wx and stock Y is Wy.
Now,
0.1085 = (0.115*Wx) +(0.094*Wy)
0.1085 = (0.115*Wx) +(0.094*(1-Wx)
Wx = 0.690476
Wy = 1 – Wx = 1-0.690476 = 0.3095
Now,
Question 7
Expected return and standard deviation of stock A and B
State of
Economy
Probability of State of
Economy
Rate of Return if State
Occurs
Stock A Stock B
Recession .15 .04 −.17
Normal .55 .09 .12
Boom .30 .17 .27
1

For Stock A
Expected return = (0.15*0.04) + (0.55*0.09) + (0.30*0.17) = 0.1065 or 10.65%
Standard deviation = Sqrt {(0.04-0.1065)2 + (0.09 -0.1065)2 + (0.17 -0.1065)2} = 0.09341 or
9.34%
For Stock B
Expected return = (0.15*(-0.17)) + (0.55*0.12) + (0.30*0.27) = 0.1215 or 12.15%
Standard deviation = Sqrt {(-0.17-0.1215)2 + (0.12 -0.1215)2 + (0.27 -0.1215)2} = 0.3271 or
32.71%
Question 10
(a) Expected return on portfolio
Weight of portfolio in A = 30%,
Weight of portfolio in B = 30%,
Weight of portfolio in C = 40%,
Expected return on portfolio = (0.30 * 0.123) + (0.30*0.080) +(0.40*0.061) = 0.085 or 8.5%
Hence, expected return on portfolio is 0.085.
(b) Variance and standard deviation of the portfolio
2