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d. Create a portfolio P comprising Firms A and B. Calculate P's average return and standard deviation using the weights given below. Using the Excel function std dev is sufficient. Also, report the covariance. Weight in Firm A Weight in Firm B 10% 90% 20% 80% 30% 70% 40% 60% 50% 50% 60% 40% 70% 30% 80% 20% 90% 10% Average return Standard Deviation e. What is your takeaway from this exercise - would you prefer to own stock in Firm A or Firm B? If you had to buy both - which weight allocation would you prefer based on the numbers above? Explain. f. Would you currently be interested in buying stock in either firm? Explain why.

d. Create a portfolio P comprising Firms A and B. Calculate P's average return and standard deviation using the weights given below. Using the Excel function std dev is sufficient. Also, report the covariance. Weight in Firm A Weight in Firm B 10% 90% 20% 80% 30% 70% 40% 60% 50% 50% 60% 40% 70% 30% 80% 20% 90% 10% Average return Standard Deviation e. What is your takeaway from this exercise - would you prefer to own stock in Firm A or Firm B? If you had to buy both - which weight allocation would you prefer based on the numbers above? Explain. f. Would you currently be interested in buying stock in either firm? Explain why.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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d. Create a portfolio P comprising Firms A and B. Calculate P's average return and standard deviation using the weights given below. Using the Excel function std dev is sufficient. Also, report the covariance. Weight in Firm A Weight in Firm B 10% 90% 20% 80% 30% 70% 40% 60% 50% 50% 60% 40% 70% 30% 80% 20% 90% 10% Average return Standard Deviation e. What is your takeaway from this exercise - would you prefer to own stock in Firm A or Firm B? If you had to buy both - which weight allocation would you prefer based on the numbers above? Explain. f. Would you currently be interested in buying stock in either firm? Explain why.
Transcribed Image Text:d. Create a portfolio P comprising Firms A and B. Calculate P's average return and standard deviation using the weights given below. Using the Excel function std dev is sufficient. Also, report the covariance. Weight in Firm A Weight in Firm B 10% 90% 20% 80% 30% 70% 40% 60% 50% 50% 60% 40% 70% 30% 80% 20% 90% 10% Average return Standard Deviation e. What is your takeaway from this exercise - would you prefer to own stock in Firm A or Firm B? If you had to buy both - which weight allocation would you prefer based on the numbers above? Explain. f. Would you currently be interested in buying stock in either firm? Explain why.
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