Given the returns of two shares F and H in the table below over the past 4 years. Find the average return and standard deviation of holding a portfolio of 50% of share F and 50% of share H over the 4-year period Share F Share H 2022 16% 14% 2023 17% 15% 2024 18% 16% 2025 19% 17%
Risk and return
Before understanding the concept of Risk and Return in Financial Management, understanding the two-concept Risk and return individually is necessary.
Capital Asset Pricing Model
Capital asset pricing model, also known as CAPM, shows the relationship between the expected return of the investment and the market at risk. This concept is basically used particularly in the case of stocks or shares. It is also used across finance for pricing assets that have higher risk identity and for evaluating the expected returns for the assets given the risk of those assets and also the cost of capital.
Given the returns of two shares F and H in the table below over the past 4 years. Find the average return and standard deviation of holding a portfolio of 50% of share F and 50% of share H over the 4-year period
|
|
Share F |
Share H |
|
2022 |
16% |
14% |
|
2023 |
17% |
15% |
|
2024 |
18% |
16% |
|
2025 |
19% |
17% |
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