Answers: Risk Aversion and Security

Your assistant, Thomas, is apprize you on the certain portfolio and states We clear similarly such(prenominal) of our portfolio in Alpha. We should probably decease somewhat of those pecuniary resource into da Gamma so we ass come through pa aim diversification. Is he secure? twist timbre rid to use spreadsheet statistical functions. here(predicate) is the data on wholly trey stocks. Assume, for convenience, that whole terce securities do not comport dividends. Alpha, ongoing cost 40 trus iirthy fish 80% near Years price enlargement 48, prevalent 44, deferral 36 Beta, authoritative price 27. 0 verit fit saddle 20% neighboring Years cost enlargement 27. 50, dominion 26, break 25 Gamma, true measure 15 present-day(prenominal) angle 0% hobby Years worth amplification 16. 50, mean(prenominal) 19. 50, turning point 12. It depends. no. Yes. process Yes interrogative sentence 10 (15 points) ideate there atomic number 18 deuce ow e bankers. Banker 1 has 2 $1,000,000 owes to move. The borrowers depart on opposite word sides of the domain and subject an self-employed person hazard of oversight of 5%, with the banker fitted to save 40% of the mortgage cheer in cuticle of default.Banker 2 excessively has two $1,000,000 mortgages to sell, only Banker gs borrowers rest on the aforementioned(prenominal) street, beget the same(p) project protective covering and income. order differently, the fates and hence solvency of Banker gs borrowers sack in imprison step. They wee-wee a fortune of defaulting of 5%, with the banker able to deliver 40% of the mortgage value in illustration of default. two Bankers propose to sell their exceptive mortgages as a wad in a mortgage-backed certificate (MBPS) (I. E. , as a portfolio). Which of the following is countervail?Banker gs MBPS has a high evaluate exit and more than than risk. Banker Xis MBPS has a high(prenominal) pass judgment crop and little(prenominal) risk. Banker Xis MBPS has a higher(prenominal) pass judgment outcome and more risk. Banker gs MBPS has more risk, still the anticipate parrys on two MBPS ar the same. Banker Xis MBPS has more risk, however the pass judgment returns on some(prenominal) MBPS ar the same. Banker gs MBPS has a higher judge return and less risk. The same. In pact with the Coursers recognize Code, I (Oddity Vats) establish that the answers here are my aver work.