This topic contains a solution. Click here to go to the answer
« previous next »

Author Question: When solving for the future value of a stream of unequal cash flows, it is important to add together ... (Read 17 times)

WWatsford

  • Hero Member
  • *****
  • Posts: 539
    • Biology Forums!
on: Jul 10, 2018
When solving for the future value of a stream of unequal cash flows, it is important to add together the values BEFORE applying the future value formula to determine their future value.
 
  Indicate whether the statement is true or false.

Question 2

An investor is considering investing one-half of his wealth in Asset A and one-half in Asset B. He is not sure how the two assets are correlated. The correlation might be r = +1 or it might be r = -1.
 
  If it is r = + 1, then the portfolio standard deviation is 15. Calculate the portfolio standard deviation if the correlation is r = -1. What is the difference between the standard deviations of Scenario 1 and Scenario 2? (Scenario 1 - Scenario 2 )
 
   ASSET A ASSET A ASSET B ASSET B Correlation
  Scenario Expected Return Standard Deviation Expected Return Standard Deviation Correlation of A and B
  1 10 20 5 10 +1
  2 10 20 5 10 -1
 
  A) 2.5
  B) 5.0
  C) 7.5
  D) 10.0
  E) 15.0


Related Topics

Need homework help now?

Ask unlimited questions for free

Ask a Question
Marked as best answer by a Subject Expert

Sammyo

  • Sr. Member
  • ****
  • Posts: 329
Reply #1 on: Jul 10, 2018
Answer to Question 1

Answer: FALSE
Explanation: Apply the FV formula first and then add the cash flows.

Answer to Question 2

D


WWatsford

  • Member
  • Posts: 539
Reply 2 on: Jul 10, 2018
Gracias!

Jossy

  • Member
  • Posts: 336
Reply 3 on: Yesterday
YES! Correct, THANKS for helping me on my review

« previous next »
 

Did you know?

Street names for barbiturates include reds, red devils, yellow jackets, blue heavens, Christmas trees, and rainbows. They are commonly referred to as downers.

Did you know?

Colchicine is a highly poisonous alkaloid originally extracted from a type of saffron plant that is used mainly to treat gout.

Did you know?

Only 12 hours after an egg cell is fertilized by a sperm cell, the egg cell starts to divide. As it continues to divide, it moves along the fallopian tube toward the uterus at about 1 inch per day.

Did you know?

Children with strabismus (crossed eyes) can be treated. They are not able to outgrow this condition on their own, but with help, it can be more easily corrected at a younger age. It is important for infants to have eye examinations as early as possible in their development and then another at age 2 years.

Did you know?

The shortest mature adult human of whom there is independent evidence was Gul Mohammed in India. In 1990, he was measured in New Delhi and stood 22.5 inches tall.

ABO Blood Reactions Are Important in Transfusions ABO Blood Reactions Are Important in Transfusions
The continents were not always in their present positions. The position of the continents is importa The continents were not always in their present positions. The position of the continents is importa
When the engine is cold, the coolant flows through the bypass. When the engine is cold, the coolant flows through the bypass.
Respirator decision logic based on the EPA method. It is very important to know when to use supplied ... Respirator decision logic based on the EPA method. It is very important to know when to use supplied ...
Ocean water flows vertically and horizontally, influencing climate Ocean water flows vertically and horizontally, influencing climate
A company spends $117 500 today and has positive cash inflows of $34 000 for each of the next 6 ... A company spends $117 500 today and has positive cash inflows of $34 000 for each of the next 6 ...
Video: Fermentation pathways

For a complete list of videos, visit our video library