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Calculate the covariance between the stocks

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Question - The following information relates to the prices and dividends of two stocks listed on the Ghana Stock Exchange as well as the average market returns.

Year

Stock A

Stock B

Market return

Price

Div.

Price

Div

2011

20

0

11

0

0

2012

24

1.2

13

1.6

0.25

2013

26

0.5

17

0.5

0.18

2014

31

1

20

0.9

0.11

2015

33

1.5

23

1.2

0.12

2016

40

2

27

1.5

0.15

Required -

a. Calculate the annual returns for each stock (2012-2016).

b. Calculate the average returns for each of the stocks and the market.

c. Calculate the covariance between the stocks.

d. Assuming the two stocks are equally weighted, calculate the portfolio return and portfolio risk.

Reference no: EM132701197

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