Question

Calculate the weighted mean of the RORs for each portfolio. Based on the results, which list shows a comparison of the overall performance of the portfolios, from best to worst?
Portfolio 1, Portfolio 3, Portfolio 2
Portfolio 2, Portfolio 3, Portfolio 1
Portfolio 3, Portfolio 1, Portfolio 2
Portfolio 3, Portfolio 2, Portfolio 1

Answer 1

Whats ROR ohh rate of return -.-

Answer 2

Yeah, rate of return

Answer 3

what is your concept of a weighted mean?

Answer 4

\[\frac{ax+by+cz+...+nk}{a+b+c+...+n}\]

Answer 5

ah hard to put into words, I watched a presentation on it and understand the basics of it.

Answer 6

do we add up our dollars, or our percentages?

Answer 7

of consider this as:
\[\sum x_i~P(x_i)\]

Answer 8

Its the percentage * dollars
And i kinda find it intuitive
Its the percentage of return or rate of return that we make on a certain sum of money

Answer 9

our excepted rate of return (the mean) is

-.009(750) + .042(2570) + .118(1990) -.014(550) +.181(1290)

Answer 10

So we multiply the percentages to each dollar amount, then find the mean of each of those results and compare them?

Answer 11

The percentage * dollar amt is in essence the mean

Answer 12

its the weighted mean

Answer 13

we can work a matrix

{{750,2570,1990,550,1290},
{640,870,1480,1410,1275},
{350,595,630,2280,2120}} dot {{-.009},{.042},{.118},{-.014},{.181}}

https://www.wolframalpha.com/input/?i=%7B%7B750%2C2570%2C1990%2C550%2C1290%7D%2C+%7B640%2C870%2C1480%2C1410%2C1275%7D%2C+%7B350%2C595%2C630%2C2280%2C2120%7D%7D+dot+%7B%7B-.009%7D%2C%7B.042%7D%2C%7B.118%7D%2C%7B-.014%7D%2C%7B.181%7D%7D

Answer 14

So the best performing portfolios was 1,3,2?

Answer 15

no, the matrix output is clearly not 1,3,2 as best performing

Answer 16

hmm why not?

Answer 17

I'm confused, what is it if it's not 1,3,2?

Answer 18

http://www.wolframalpha.com/input/?i=+561.8+%2F%28sum+%7B750%2C2570%2C1990%2C550%2C1290%7D%29%2C+416.455%2F%28+sum+%7B640%2C870%2C1480%2C1410%2C1275%7D%29%2C+447.98%2F%28+sum+%7B350%2C595%2C630%2C2280%2C2120%7D%29

Answer 19

Like even if we divide or rate of return by the total dollar value in each portfolio you still result with 1,3,2

Answer 20

hmm, dividing by something ..... i might have seen this askew

Answer 21

nah i made up the dividing thing ... it was just a random guess

Answer 22

expected return divided by money spent ... seems fair

Answer 23

if we expect 23, after spending 100

what is our ROR?

Answer 24

23%

Answer 25

wait, reading the question is becomeing a chore lol

we are given the ROR already, so its just the expected return

Answer 26

LOL
Right so why isnt the answer 1,3,2
We make the most return with portfolio 1 then portfolio 3 and then portfolio 2 right?

Answer 27

if our ROR is 23% and we spend 100, then our efforts profit us 23 dollars right?

Answer 28

yea

Answer 29

Port1, we expect to make 561.80 for our investments right?

sum of, ROR * ($$) is our expected ROR

Answer 30

tell me the definition of weighted average, make sure im remembering this correctly

Answer 31

OMGGGGGGGG

Answer 32

im sure im missing someting to do with allocations

Answer 33

WE ARE CALCULATING THISS INCORRECTLY

Answer 34

rate of return * weight of asset in portfolio

Answer 35

\[ror*\frac an\]
a/n being the weight of the yeah

Answer 36

YEAAA THATS IT!!!!

Answer 37

http://www.wolframalpha.com/input/?i=+561.8+%2F%28sum+%7B750%2C2570%2C1990%2C550%2C1290%7D%29%2C+416.455%2F%28+sum+%7B640%2C870%2C1480%2C1410%2C1275%7D%29%2C+447.98%2F%28+sum+%7B350%2C595%2C630%2C2280%2C2120%7D%29

But Its what I did earlier on ..... I just completed it in 2 steps

Answer 38

I divided it by n after we found our return
So the answer still remains 1,3,2 ?

Answer 39

yep, my original matrix needs to use unit vectors instead.

1,3,2 is good for me now

Answer 40

@Brad1996 Sorry that im taking over your question .... got a huge exam in 3 weeks so attempting to absorb as much as I can

Answer 41

Ok great @amistre64 Thanks

Answer 42

unit vector is an improper description, but its reminds of a unit vector adjustment, dividing by a length

http://www.wolframalpha.com/input/?i=%7B%7B750%2F7150%2C2570%2F7150%2C1990%2F7150%2C550%2F7150%2C1290%2F7150%7D%2C+%7B640%2F5675%2C870%2F5675%2C1480%2F5675%2C1410%2F5675%2C1275%2F5675%7D%2C+%7B350%2F5975%2C595%2F5975%2C630%2F5975%2C2280%2F5975%2C2120%2F5975%7D%7D+dot+%7B%7B-.009%7D%2C%7B.042%7D%2C%7B.118%7D%2C%7B-.014%7D%2C%7B.181%7D%7D

Answer 43

so, does any of this help brad understand the problem?

i tend to learn best from my own mistakes lol

Answer 44

Scared him off ... oh well