he following shows the expected percentage returns on three stocks over the next six years: Stock Percentage Return (%) Year 1 2 3

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
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The following shows the expected percentage returns on three stocks over the next six years:

Stock Percentage Return (%)
Year 1 2 3 4 5 6
A 10 5 6 8 12 15
B 8 4 4.8 6.4 9.6 12
C 5 10 12 10 6 6

Required:

i  Find the expected return for each of the stock.

ii Compute the variance and standard deviation for stock A, B and C. Show your working.

iii Justify how can you minimize the risk of the above combination of stocks.

 

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