### IntroThe following table shows historical beginning-of-year prices for two stocks.| Year | Stock A | Stock B ||------|---------|---------|| 2014 | 33.47 | 575.35 || 2015 | 31.54 | 569.84 || 2016 | 30.91 | 594.22 || 2017 | 33 | 617.41 || 2018 | 30.7 | 542.46 || 2019 | 32.47 | 531.9 || 2020 | 28.34 | 490.58 || 2021 | 28.37 | 588.6 || 2022 | 29.25 | 641.98 |### Part 1**Calculate the annual returns. What was the arithmetic average annual return for stock B?**- Input field for answer (4+ decimals)- Submit button### Part 2**What was the variance for stock B?**- Input field for answer (4+ decimals)- Submit button### Part 3**What was the standard deviation for stock B?**- Input field for answer (3+ decimals)- Submit button### Part 4**What was the covariance of returns?**- Input field for answer (5+ decimals)- Submit button### Part 5**What was the correlation coefficient?**- Input field for answer (2+ decimals)- Submit button

Arithmetic Average Return: It refers to the return on investment computed by adding the returns for…

Part 1 Calculate the annual returns. What was the arithmetic average annual return for stock B? 4+ decimals Submit Part 2 What was the variance for stock B? 4+ decimals Submit Part 3 What was the standard deviation for stock B?

Part 1 Calculate the annual returns. What was the arithmetic average annual return for stock B? 4+ decimals Submit Part 2 What was the variance for stock B? 4+ decimals Submit Part 3 What was the standard deviation for stock B?

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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Concept explainers

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

### Intro

The following table shows historical beginning-of-year prices for two stocks.

| Year | Stock A | Stock B |
|------|---------|---------|
| 2014 | 33.47 | 575.35 |
| 2015 | 31.54 | 569.84 |
| 2016 | 30.91 | 594.22 |
| 2017 | 33 | 617.41 |
| 2018 | 30.7 | 542.46 |
| 2019 | 32.47 | 531.9 |
| 2020 | 28.34 | 490.58 |
| 2021 | 28.37 | 588.6 |
| 2022 | 29.25 | 641.98 |

### Part 1

**Calculate the annual returns. What was the arithmetic average annual return for stock B?**

- Input field for answer (4+ decimals)
- Submit button

### Part 2

**What was the variance for stock B?**

- Input field for answer (4+ decimals)
- Submit button

### Part 3

**What was the standard deviation for stock B?**

- Input field for answer (3+ decimals)
- Submit button

### Part 4

**What was the covariance of returns?**

- Input field for answer (5+ decimals)
- Submit button

### Part 5

**What was the correlation coefficient?**

- Input field for answer (2+ decimals)
- Submit button

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