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: Year 2017 2018 2019 TA -17.00% 37.00 FB -6.00% 16.00 -12.00 28.00 2020 -5.00 47.00 2021 23.00 21.00 a. Calculate the average rate of return for each stock during the 5-year period. Do not round intermediate calculations. Round your answers to two decimal places. Stock A: Stock B: % % b. Suppose you had 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? Do not round intermediate calculations. Round your answers to two decimal places. Negative values, if any, should be indicated by a minus sign. Portfolio Year 2017 2018 2019 2020 2021 Average return c. Calculate the standard deviation of returns for each stock and for the portfolio. Do not round intermediate calculations. Round your answers to two decimal places. FA % FB % % % % % % % Portfolio % Std. Dev. d. Suppose you are a risk-averse investor. Assuming Stocks A and B are your only choices, would you prefer to hold Stock A, Stock B, or the portfolio? Why? A risk-averse investor should choose -Select-, since it offers -Select- expected return with -Select-risk.
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: Year 2017 2018 2019 TA -17.00% 37.00 FB -6.00% 16.00 -12.00 28.00 2020 -5.00 47.00 2021 23.00 21.00 a. Calculate the average rate of return for each stock during the 5-year period. Do not round intermediate calculations. Round your answers to two decimal places. Stock A: Stock B: % % b. Suppose you had 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? Do not round intermediate calculations. Round your answers to two decimal places. Negative values, if any, should be indicated by a minus sign. Portfolio Year 2017 2018 2019 2020 2021 Average return c. Calculate the standard deviation of returns for each stock and for the portfolio. Do not round intermediate calculations. Round your answers to two decimal places. FA % FB % % % % % % % Portfolio % Std. Dev. d. Suppose you are a risk-averse investor. Assuming Stocks A and B are your only choices, would you prefer to hold Stock A, Stock B, or the portfolio? Why? A risk-averse investor should choose -Select-, since it offers -Select- expected return with -Select-risk.
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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