Calculate the average rate of return for each stock

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Question - Cahya Permana is an entrepreneur who is interested in investing in stocks. He hesitates to invest in individual stocks or portfolios of stocks. Cahya then learned more about Stock X and Stock Y which have historical returns as follows:

Year

return x

return y

2016

(20%)

(5%)

2017

42%

15%

2018

20%

(13%)

2019

(8%)

50%

2020

25%

12%

Required - Based on this information, answer the following questions.

a. Calculate the average rate of return for each stock for 5 years!

b. If Cahya has a stock portfolio consisting of Shares X and Shares Y with a share of 50% each, what is the realized rate of return of the portfolio each year? Also calculate the average return on the portfolio in that period!

c. You are asked to provide recommendations for stock options that are least risky for Cahya. Would you recommend Stock X, Stock am Y, or a portfolio of stocks? Explain your argument!

Reference no: EM133090903

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