Problem 6-03 The following are the monthly rates of return for Madison Cookies and for Sophie Electric during a six-month period. Month Madison Cookies Sophie Electric 1 -0.03 0.07 2 0.07 -0.02 3 -0.09 -0.10 4 0.13 0.17 5 -0.02 -0.07 6 0.04 0.02 Compute the following. Do not round intermediate calculations. Round your answers to four decimal places. a. Average monthly rate of return R; for each stock. Madison Cookies: Sophie Electric: b. Standard deviation of returns for each stock. Madison Cookies: Sophie Electric: c. Covariance between the rates of return. d. The correlation coefficient between the rates of return. Would these two stocks be good choices for diversification? Why or why not? Madison Cookies and Sophie Electric are -Select- choices for diversification as these assets have -Select- correlation.
Problem 6-03 The following are the monthly rates of return for Madison Cookies and for Sophie Electric during a six-month period. Month Madison Cookies Sophie Electric 1 -0.03 0.07 2 0.07 -0.02 3 -0.09 -0.10 4 0.13 0.17 5 -0.02 -0.07 6 0.04 0.02 Compute the following. Do not round intermediate calculations. Round your answers to four decimal places. a. Average monthly rate of return R; for each stock. Madison Cookies: Sophie Electric: b. Standard deviation of returns for each stock. Madison Cookies: Sophie Electric: c. Covariance between the rates of return. d. The correlation coefficient between the rates of return. Would these two stocks be good choices for diversification? Why or why not? Madison Cookies and Sophie Electric are -Select- choices for diversification as these assets have -Select- correlation.
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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Problem 6-03
The following are the monthly rates of return for Madison Cookies and for Sophie Electric during a six-month period.
Month
Madison Cookies Sophie Electric
-0.03
0.07
2
0.07
-0.02
3
-0.09
-0.10
4
0.13
0.17
5
-0.02
-0.07
6
0.04
0.02
Compute the following. Do not round intermediate calculations. Round your answers to four decimal places.
a. Average monthly rate of return R, for each stock.
Madison Cookies:
Sophie Electric:
b. Standard deviation of returns for each stock.
Madison Cookies:
Sophie Electric:
c. Covariance between the rates of return.
d. The correlation coefficient between the rates of return.
Would these two stocks be good choices for diversification? Why or why not?
Madison Cookies and Sophie Electric are -Select-
choices for diversification as these assets have -Select-
correlation.
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