Consider the following annual closing prices of stock A and stock B. B Date: Stock A Prices (in $) Stock 8 Prices (in $) 81 86 78 87 68 103 87 105 G 8 Year 1 Year 2 Year 3 Year 4 Year S Year 6 Year 7 Year 8 167 9 @6 O 3.05 % O 3.81 % O 2.28% O 0.76% 10 Year 11 Year 12 Year 11 13 Year 14 Year 13 15 Year 14 16 Year 15 17 18 10 12 12 102 117 96 94 91 78 100 378 375 452 390 339 494 442 450 438 427 392 440 370 334 465 D If you had invested 10 percent of your total investment on stock A and 90 percent on stock B at the beginning of the period, what would be the historical mean of the portfolio consisting of these two stocks?
Consider the following annual closing prices of stock A and stock B. B Date: Stock A Prices (in $) Stock 8 Prices (in $) 81 86 78 87 68 103 87 105 G 8 Year 1 Year 2 Year 3 Year 4 Year S Year 6 Year 7 Year 8 167 9 @6 O 3.05 % O 3.81 % O 2.28% O 0.76% 10 Year 11 Year 12 Year 11 13 Year 14 Year 13 15 Year 14 16 Year 15 17 18 10 12 12 102 117 96 94 91 78 100 378 375 452 390 339 494 442 450 438 427 392 440 370 334 465 D If you had invested 10 percent of your total investment on stock A and 90 percent on stock B at the beginning of the period, what would be the historical mean of the portfolio consisting of these two stocks?
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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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.
Question
A6)
Transcribed Image Text:Consider the following annual closing prices of stock A and stock B.
CAR
A
B
Date
Stock A Prices (in $) Stock 8 Prices (in $)
81
378
86
375
78
452
87
68
103
87
105
102
117
96
94
91
78
100
1
2
3
4
6
8
9
Year 1
Year 2
Year 3
Year
4
Year
Year
Year 7
Year 8
Year 9
16
11 Year
195
6
O 3.05 %
O 3.81 %
O 2.28%
O 0.76%
9
10
11
12 Year
13 Year
14 Year
15 Year 14
16 Year 15
17
18
2345
390
339
494
442
450
438
427
392
440
370
334
465
D
If you had invested 10 percent of your total investment on stock A and 90 percent on stock B at the
beginning of the period, what would be the historical mean of the portfolio consisting of these two
stocks?
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