What would have been the realized rate of return

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Reference no: EM132789129

Historical Realized Rates of Return

Stocks A and B have the following historical returns:

Year

A B

2012 -17.00% -12.60%

2013 27.25 27.80

2014 16.75 31.30

2015 -3.50 -8.00

2016 30.25 15.25

Question 1: Calculate the average rate of return for each stock during the 5-year period. Round your answers to two decimal places.

Question 2: Assume that someone held a portfolio consisting 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? Round your answers to two decimal places.

Question 3: Calculate the standard deviation of returns for each stock and for the portfolio. Round your answers to two decimal places.

Question 4: 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?

Reference no: EM132789129

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