Musumeci Capital Management

Ch. 6, problem A6, p. 162, (Emery, D. R., Finnerty, J. D., & Stowe, J. D., 2007).
Expected portfolio return) Musumeci Capital Management has invested its portfolio as shown here. What is Musumeci’s expected portfolio return?

The expected portfolio return is 10.4% -- See attached excel file for calculations

Ch. 6, problem B6, p. 163, (Emery, D. R., Finnerty, J. D., & Stowe, J. D., 2007).
(Expected return and risk) Procter & Gamble is considering three possible capital investment projects. The projected returns depend on the future state of the economy as given here.

    . Calculate each project’s expected return, variance, and standard deviation.

|                                   |1                 |2                 |3                 |
|Expected Return                   |0.134             |0.117             |0.102             |
|Variance                           |0.000464         |0.003081         |0.000816         |
|Standard Deviation                 |0.0215           |0.0555           |0.0286           |

See attached excel file for the calculations.

    . Rank the projects on the basis of (1) expected return and (2) risk. Which project would you choose?

Expected Return (least to greatest): 3, 2, 1
Risk (least to greatest): 1, 3, 2

The clear choice here is project 1.   It has the greatest expected return and the least risk of the three projects.

Ch. 6, problem B10, p. 164, (Emery, D. R., Finnerty, J. D., & Stowe, J. D., 2007).
(Excel: Calculating means, standard deviations, covariance, and correlation) Given the probability distributions of returns for stock X and stock Y, compute the expected return for each stock, X and Y here.

Expected Return of X: 10.30%
Expected Return of Y: 7.70%

See attached excel sheet for calculations