Calculate the average rate of return for each stock during the period 2010 through 2014. Assume that someone held a portfolio consisting of 50% of Stock A and 50% of Stock B. What would the realized rate of return on the portfolio have been each year? What would the average return on the portfolio have been during this period? Calculate the standard deviation of returns for each stock and for the portfolio. Calculate the coefficient of variation for each stock and for the portfolio. Assuming you are a risk-averse investor, would you prefer to hold Stock A, Stock B, or the portfolio? Explain thoroughly why.
Calculate the average rate of return for each stock during the period 2010 through 2014. Assume that someone held a portfolio consisting of 50% of Stock A and 50% of Stock B. What would the realized rate of return on the portfolio have been each year? What would the average return on the portfolio have been during this period? Calculate the standard deviation of returns for each stock and for the portfolio. Calculate the coefficient of variation for each stock and for the portfolio. Assuming you are a risk-averse investor, would you prefer to hold Stock A, Stock B, or the portfolio? Explain thoroughly why.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Question
Stocks A and B have the following historical returns:
|
Year |
Stock A’s Returns, rA |
Stock B’s Returns, rB |
|
2010 |
(18.00%) |
(14.50%) |
|
2011 |
33.00 |
21.80 |
|
2012 |
15.00 |
30.50 |
|
2013 |
(0.50) |
(7.60) |
|
2014 |
27.00 |
26.30 |
- Calculate the average
rate of return for each stock during the period 2010 through 2014. - Assume that someone held a portfolio consisting of 50% of Stock A and 50% of Stock B. What would the realized rate of return on the portfolio have been each year? What would the average return on the portfolio have been during this period?
- Calculate the standard deviation of returns for each stock and for the portfolio.
- Calculate the coefficient of variation for each stock and for the portfolio.
- Assuming you are a risk-averse investor, would you prefer to hold Stock A, Stock B, or the portfolio? Explain thoroughly why.
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