Calculate the average rate of return for each stock

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Question - Stock A and B have the following historical returns

Year

Stock A's returns, rA

Stock B's Returns, rB

2004

(18.00%)

(14.50%)

2005

33.00

21.80

2006

15.00

30.50

2007

(0.50)

(7.60)

2008

27.00

26.30

(a) Calculate the average rate of return for each stock during the period 2004 though 2008

(b) Assume that someone held a portfolio consisting of 50% of stock A and 50% of stock b. What would the realized rate of return of the portfolio have been during this period.

(c) Calculate the standard deviation of returns for each stock and for the portfolio.

(d) Calculate the coefficient of variation for each stock and for the portfolio

(e) Assuming you are a risk-averse investor, would you prefer to hold stock A, stock B, or the portfolio? Why?

Reference no: EM131775750

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