9. You are considering an investment in either individual stocks or a portfolio of stocks. The two stocks you are researching, Stock A and Stock B, have the following historical returns: Return Year Stock A Stock B 2014 -0.2 -0.05 2015 0.42 0.15 2016 0.2 -0.13 2017 -0.08 0.5 2018 0.25 0.12 a. Calculate the average rate of return for each stock during the 5-year period. b. Suppose you 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? c. Calculate the standard deviation of returns for each stock and for the portfolio.
9. You are considering an investment in either individual stocks or a portfolio of stocks. The two stocks you are researching, Stock A and Stock B, have the following historical returns: Return Year Stock A Stock B 2014 -0.2 -0.05 2015 0.42 0.15 2016 0.2 -0.13 2017 -0.08 0.5 2018 0.25 0.12 a. Calculate the average rate of return for each stock during the 5-year period. b. Suppose you 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? c. Calculate the standard deviation of returns for each stock and for the portfolio.
Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter2: Risk And Return: Part I
Section: Chapter Questions
Problem 13P
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Transcribed Image Text:9. You are considering an investment in either individual stocks or a portfolio of stocks. The two
stocks you are researching, Stock A and Stock B, have the following historical returns:
Return
Year
Stock A
Stock B
2014
-0.2
-0.05
2015
0.42
0.15
2016
0.2
-0.13
2017
-0.08
0.5
2018
0.25
0.12
a. Calculate the average rate of return for each stock during the 5-year period.
b. Suppose you 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?
c. Calculate the standard deviation of returns for each stock and for the portfolio.
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