Calculate the standard deviation of returns

Reference no: EM1343956

You are considering an investment in either individual stocks or a portfolio of stocks. The two stocks you are researching, stocks A and B, have the following historical returns:
Year a b
2009 -20.00% -5.00%
2010 42 15
2011 20 -13
2012 -8 50
2013 25 12

a. Calculate the average rate of return for each stock during the 5-year period
b. Suppose you had held a portfolio of 50% of stock A and 50% of stock B what would have been the realized rate of return on the portfolio in each year? what would have been the average return on the portfolio during this period?
c. Calculate the standard deviation of returns for each stock and for the portfolio
d. If you are a risk-averse investor, then, assuming these are your only choices, would you prefer to hold stock A, Stock B, or the portfolio? Why?

Reference no: EM1343956

Questions Cloud

Differences among horizontal-vertical-conglomerate mergers : Write down the differences among horizontal, vertical, and conglomerate mergers.

How much life insurance do you need : Describe which health care plan you would choose. Looking at eHealth Insurance, enter your information and then pick three companies to compare

Effective address-addressing mode of instruction is direct : Evaluate the effective address if the addressing mode of the instruction is (a) direct; (b) immediate; (c) relative; (d) register indirect.

Finance-share calculations : Compute the expected earnings per share (EPS) for ABC for each of the next five years (2010-2014) without the merger. What would ABC's stockholders earn in each of the next 5 years (2010-2014) on each of their ABC shares swapped for DEF shares a a r..

Calculate the standard deviation of returns : You are thinking an investment in either individual stocks or a portfolio of stocks. The two (2) stocks you are researching, stocks A & B, have the following historical returns;

Explaining instruction format of operation code field : Operation code field, a mode field, to specify one of seven addressing modes, a register address field to specify one of 60 processor registers, and memory address. Specify instruction format and number of bits in each field if the instruction ..

What is the accounts receivable balance : The Inventory Conversion period is 40 days, the Accounts Payable Balance is $2,000, and the Operating Cycle is 60 days and What is the Accounts Receivable balance?

Calculate after-tax cost of debt financing : Last year Wei Guan corporation had $350 million of sales, and it had $270 million of fixed assets that were used at 65 percent of capacity. In millions, by how much could Wei Guan's sales raise.

Illustrate what role does weak financial regulation : Illustrate what role does weak financial regulation also supervision play in causing financial crises.

User Account

All Pages