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Here are the returns on two stocks. Digital Executive Cheese Fruit January February March April May +14 +7 -3 +1 +5 +4 +7 +12 -4 +2 June +3 +7 July August -2 -3 -8 -2 Required: a-1. Calculate the variance and standard deviation of each stock. a-2. Which stock is riskier if held on its own? b. Now calculate the returns in each month of a portfolio that invests an equal amount each month in the two stocks.

Here are the returns on two stocks. Digital Executive Cheese Fruit January February March April May +14 +7 -3 +1 +5 +4 +7 +12 -4 +2 June +3 +7 July August -2 -3 -8 -2 Required: a-1. Calculate the variance and standard deviation of each stock. a-2. Which stock is riskier if held on its own? b. Now calculate the returns in each month of a portfolio that invests an equal amount each month in the two stocks.

Intermediate Financial Management (MindTap Course List)
Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter3: Risk And Return: Part Ii
Section: Chapter Questions
Problem 3P: Two-Asset Portfolio Stock A has an expected return of 12% and a standard deviation of 40%. Stock B...
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Here are the returns on two stocks. Digital Executive Cheese Fruit January February +14 +7 -3 +1 March +5 +4 April May +7 +12 -4 +2 June +3 +7 July August -8 Required: a-1. Calculate the variance and standard deviation of each stock. a-2. Which stock is riskier if held on its own? b. Now calculate the returns in each month of a portfolio that invests an equal amount each month in the two stocks. c. Is the variance more or less than halfway between the variance of the two individual stocks?
Transcribed Image Text:Here are the returns on two stocks. Digital Executive Cheese Fruit January February +14 +7 -3 +1 March +5 +4 April May +7 +12 -4 +2 June +3 +7 July August -8 Required: a-1. Calculate the variance and standard deviation of each stock. a-2. Which stock is riskier if held on its own? b. Now calculate the returns in each month of a portfolio that invests an equal amount each month in the two stocks. c. Is the variance more or less than halfway between the variance of the two individual stocks?
Now calculate the returns in each month of a portfolio that invests an equal amount each month in the two stocks. (Negative amounts should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to 2 decimal places.) Portfolio Month Return January February March April May June July August
Transcribed Image Text:Now calculate the returns in each month of a portfolio that invests an equal amount each month in the two stocks. (Negative amounts should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to 2 decimal places.) Portfolio Month Return January February March April May June July August
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