Percentages need to be entered in decimal format, for instance 3% would be entered as .03.That is the return for stock C by the wayAdjust the portfolio to consist of 33.33% Stock A, 33.33% Stock B, and 33.33% Stock C (row 31). How does this change affect the portfolio average rate of return, standard deviation, and coefficient of variation versus when 50% was invested in Stock A and 50% in Stock B? Make some other changes in the percentage of stocks in the portfolio (Row 31), making sure that the percentages add up to 100%. For example, you could enter 25% for Stock A, 25% for Stock B, and 50% for Stock C. Notice that the average rate of return for the portfolio remains constant for each scenario, but the standard deviation changes. Would you prefer to hold a portfolio consisting only of Stocks A and B or a portfolio that also includes Stock C? Why or why not? **Chapter 8 Spreadsheet-Related Problem (C08)****Realized Rates of Return**1. It is important to familiarize yourself with the instructions for utilizing these computerized models. These instructions are available in a separate worksheet labeled "INSTRUCTIONS." If you have not reviewed them yet, it is recommended you do so now. To access these instructions, click on the worksheet labeled INSTRUCTIONS.2. A graph displaying the return and standard deviation of each stock and the portfolio will be shown if you click the worksheet labeled GRAPH at the bottom of this spreadsheet. To navigate back to this worksheet, click on the worksheet labeled C08 at the bottom of the GRAPH worksheet.**Input Data:**| Year | Stock A | Stock B | Stock C | Portfolio ||------|---------|---------|---------|-----------|| -1 | -18.00% | -14.50% | | -16.25% || -2 | 33.00% | 21.80% | | 27.40% || -3 | 15.00% | 30.50% | | 22.75% || -4 | -0.50% | -7.60% | | -4.05% || -5 | 27.00% | 26.30% | | 26.65% |**Key Output:**- \( \overline{r} \) (average return) = - Stock A: 11.30% - Stock B: 11.30% - Portfolio: 11.30% - \( \sigma \) (standard deviation) = - Stock A: 20.79% - Stock B: 20.78% - Portfolio: 20.13% - CV (coefficient of variation) = - Stock A: 1.84 - Stock B: 1.84 - Portfolio: 1.78**Percent in:**- Stock A: 50.00%- Stock B: 50.00%- Stock C: 0.00%- Portfolio: 100.00%**Correlation Coefficients (ρ):**- Stocks A & B: 0.88- Stocks A & C: The image contains a bar graph comparing the standard deviation and return for three individual stocks—Stock A, Stock B, and Stock C—as well as a combined portfolio. The graph is titled "C08 GRAPH INSTRUCTIONS."### Explanation of the Graph:- **X-Axis**: The horizontal axis represents the different categories analyzed: Stock A, Stock B, Stock C, and Portfolio.- **Y-Axis**: The vertical axis measures the values ranging from 0 to 4, though the exact units are not specified.- **Legend**: The legend uses color coding to distinguish between two metrics: - "Sd Deviation" (Standard Deviation) is represented by a dark purple color. - "Return" is represented by a light blue color. ### Observations:- Each category (Stock A, Stock B, Stock C, Portfolio) has two bars: one for standard deviation and one for return.- The bars for both standard deviation and return are relatively short, indicating low values for both metrics across all stocks and the portfolio in comparison to the maximum value shown on the graph. This graph might be used to demonstrate how diversification in a portfolio affects the standard deviation and return compared to individual stocks.

Note: Return of the stock is taken what was provided in the previous question. Please adjust the…

Answered: Percentages need to be entered in…

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