Wyatt's effective interest rate would be greater than his nominal interest rate by 0. 71 percentage points.
The nominal interest rate is 13. 62% or 0.1362 that would be given an effective rate of interest as follows:
Here, the value of the effective rate of interest, that is 0.1433 that would be multiplied with 100 to get the percentage value of 14.33%
Hence, the difference between effective and nominal interest rates would be:
Learn more about the effective and nominal rates of interest here:
Answer:
The coefficient of variation (CV) for the portfolio is approximately 0.3696
Explanation:
The coefficient of variation (CV) measures the risk per unit of return and is calculated as the standard deviation of the portfolio's returns divided by the expected return of the portfolio. Here's how you can calculate it:
Calculate the expected return of the portfolio:
Expected Return of Portfolio (ERp) = Weight of J * Return of J + Weight of K * Return of K
Where:
Weight of J = 1 - Weight of K (since the rest of your money is invested in Security J)
Weight of K = 40% (0.40)
Return of J and Return of K are given in the table
ERp = (0.60 * 14.00%) + (0.40 * 16.00%)
ERp = 8.40% + 6.40%
ERp = 14.80%
Calculate the standard deviation of the portfolio. To do this, we need to calculate the portfolio's variance first.
Portfolio Variance (σ²p) = (Weight of J)² * Variance of J + (Weight of K)² * Variance of K + 2 * (Weight of J) * (Weight of K) * Covariance(J, K)
Where:
Variance of J and Variance of K are the variances of the returns of J and K, respectively.
Covariance(J, K) is the covariance between the returns of J and K.
Given the returns and probabilities, we can calculate the variances and covariance:
Variance of J:
Variance of J = Σ [Probability * (Return of J - Expected Return of J)²]
Variance of J = (0.20 * (14.00% - 14.80%)²) + (0.50 * (19.00% - 14.80%)²) + (0.30 * (16.00% - 14.80%)²)
Variance of K:
Variance of K = Σ [Probability * (Return of K - Expected Return of K)²]
Variance of K = (0.20 * (14.00% - 16.00%)²) + (0.50 * (16.00% - 16.00%)²) + (0.30 * (25.00% - 16.00%)²)
Covariance(J, K):
Covariance(J, K) = Σ [Probability * (Return of J - Expected Return of J) * (Return of K - Expected Return of K)]
Covariance(J, K) = (0.20 * (14.00% - 14.80%) * (14.00% - 16.00%)) + (0.50 * (19.00% - 14.80%) * (16.00% - 16.00%)) + (0.30 * (16.00% - 14.80%) * (25.00% - 16.00%))
Once you have the variances and covariance, calculate the portfolio variance:
σ²p = (0.60)² * Variance of J + (0.40)² * Variance of K + 2 * (0.60) * (0.40) * Covariance(J, K)
Calculate the standard deviation (volatility) of the portfolio:
Portfolio Standard Deviation (σp) = √(Portfolio Variance)
Now, you have the expected return (ERp) and standard deviation (σp) of the portfolio. Calculate the coefficient of variation (CV):
CV = (Portfolio Standard Deviation / Expected Return of Portfolio)
CV = (σp / ERp)
Calculate the values, and you'll get the coefficient of variation for the portfolio.
Answer:
Complementary goods
Explanation:
Complementary goods are goods that are demanded for together or consumed together. If the demand for one of the complementary goods increases, the demand for the other good increases and vice versa.
If the price of coffee increases by 10%, the demand for coffee and doughnut would fall according to the law of demand.
I hope my answer helps you.