Question 1The following are the monthly rates of returns for two stocks, Stock A and Stock B over2022.Month123456789101112Stock A2.52%-3.2%0.54%1.32%2.56%1.10%1.85%0.58%1.98%0.05%1.15%2.23%Stock B1.37%Page 3 of 51.58%0.98%-0.78%0.98%1.35%-2.04%0.87%2.09%-0.07%1.78%0.63%(a) What is the average monthly rate of return for each stock? What is the standarddeviation of returns for each stock?(b) Calculate the covariance between the rates of return. Calculate the correlationcoefficient between the rates of return.ortfolio Analysis(c) Comment on the diversification benefits of constructing a portfolio of these twostocks.

To calculate the average monthly rate of return and standard deviation of returns for each stock, we…

Question 1 The following are the monthly rates of returns for two stocks, Stock A and Stock Bo 2022. Month 1 2 3 4 5 6 7 8 9 10 11 12 Stock A 2.52% -3.2% 0.54% 1.32% 2.56% 1.10% 1.85% 0.58% 1.98% 0.05% 1.15% 2.23% Stock B 1.37% 1.58% 0.98% -0.78% 0.98% 1.35% -2.04% 0.87% 2.09% -0.07% 1.78% 0.63%

Question 1 The following are the monthly rates of returns for two stocks, Stock A and Stock Bo 2022. Month 1 2 3 4 5 6 7 8 9 10 11 12 Stock A 2.52% -3.2% 0.54% 1.32% 2.56% 1.10% 1.85% 0.58% 1.98% 0.05% 1.15% 2.23% Stock B 1.37% 1.58% 0.98% -0.78% 0.98% 1.35% -2.04% 0.87% 2.09% -0.07% 1.78% 0.63%

Fundamentals of Financial Management, Concise Edition (with Thomson ONE - Business School Edition, 1 term (6 months) Printed Access Card) (MindTap Course List)

8th Edition

ISBN:9781285065137

Author:Eugene F. Brigham, Joel F. Houston

Publisher:Eugene F. Brigham, Joel F. Houston

Chapter8: Risk And Rates Of Return

Section: Chapter Questions

Problem 4DQ: Select one of the four stocks listed in Question 3 by entering the companys ticker symbol on the...

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