EBK INVESTMENTS
11th Edition
ISBN: 9781259357480
Author: Bodie
Publisher: MCGRAW HILL BOOK COMPANY
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Chapter 24, Problem 8CP
Summary Introduction
To calculate: The geometric mean(annualized return) of return for entire period with the given information of different return rates.
Introduction: Geometric mean is calculated for the series which has a common ratio between two terms. This ration remains same for other terms also.
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Students have asked these similar questions
Below are the annual returns of the stock A, B, C and D and the market portfolio
for the period 2018-2022. Find the expected return and standard deviation of the stock
A, B, C, D and the market portfolio.
Asset A
Asset D
| 15,00
13,00
| 10,00
13,00
Prob.
Asset B
9,00
Year
2018
2019
2020
2021
2022
Asset C
12,00
Market
14,00
12,00
|11,00
0,20
0,25
| 13,00
9,00
| 11,00
8,00
0,10
0,20
0,25
15,00
| 11,00
11,00
| 9,00
12,00
12,00
9,00
12,00
15,00
10,00
12,00
13,00
Below are the annual returns of the stock A, B, C and D and the market portfolio for the period 2018-2022. Find the expected return and standard deviation of the stock A, B, C, D and the market
Year
Prob.
Asset A
Asset B
Asset C
Asset D
Market
2018
0,20
11,00
9,00
12,00
15,00
14,00
2019
0,25
13,00
11,00
15,00
13,00
12,00
2020
0,10
9,00
8,00
11,00
10,00
9,00
2021
0,20
12,00
12,00
11,00
13,00
12,00
2022
0,25
15,00
10,00
9,00
12,00
13,00
Using the data in the table, consider a portfolio that maintains a 35% weight on stock A and a 65% weight on stock B.
a. What is the return each year of this portfolio? (2010-2015)
b. Based on your results from part (a), compute the average return and volatility of the portfolio.
c. Show that (i) the average return of the portfolio is equal to the (weighted) average of the average returns of the two stocks, and (ii) the volatility of the portfolio equals the same result as from the calculation in Eq. 11.9.
d. Explain why the portfolio has a lower volatility than the average volatility of the two stocks.
Chapter 24 Solutions
EBK INVESTMENTS
Ch. 24 - Prob. 1PSCh. 24 - Prob. 2PSCh. 24 - Prob. 3PSCh. 24 - Prob. 4PSCh. 24 - Prob. 5PSCh. 24 - Prob. 6PSCh. 24 - Prob. 7PSCh. 24 - Prob. 8PSCh. 24 - Prob. 9PSCh. 24 - Prob. 10PS
Ch. 24 - Prob. 11PSCh. 24 - Prob. 12PSCh. 24 - Prob. 13PSCh. 24 - Prob. 14PSCh. 24 - Prob. 15PSCh. 24 - Prob. 16PSCh. 24 - Prob. 17PSCh. 24 - Prob. 18PSCh. 24 - Prob. 19PSCh. 24 - Prob. 20PSCh. 24 - Prob. 21PSCh. 24 - Prob. 22PSCh. 24 - Prob. 1CPCh. 24 - Prob. 2CPCh. 24 - Prob. 3CPCh. 24 - Prob. 4CPCh. 24 - Prob. 5CPCh. 24 - Prob. 6CPCh. 24 - Prob. 7CPCh. 24 - Prob. 8CPCh. 24 - Prob. 9CPCh. 24 - Prob. 10CPCh. 24 - Prob. 11CPCh. 24 - Prob. 12CPCh. 24 - Prob. 13CPCh. 24 - Prob. 14CP
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