QUESTION 2 The following table contains yearly rate of returns on Pepsi and Sprite from 2020 to 2023: Year Rate of return on Pepsi (%) Rate of return on Sprite (%) 2020 10 10 2021 12 10 2022 2023 14 16 9 7 1. Compute RRC for each stock; 2. Would you invest in Pepsi or Sprite? Why or why not; 3. Compute the covariance between the return on Pepsi and the return on Sprite; 3. In order to mitigate risk (given your result in 1.3), would you consider investing in a portfolio consisting of Pepsi and Sprite? Why or why not?
QUESTION 2 The following table contains yearly rate of returns on Pepsi and Sprite from 2020 to 2023: Year Rate of return on Pepsi (%) Rate of return on Sprite (%) 2020 10 10 2021 12 10 2022 2023 14 16 9 7 1. Compute RRC for each stock; 2. Would you invest in Pepsi or Sprite? Why or why not; 3. Compute the covariance between the return on Pepsi and the return on Sprite; 3. In order to mitigate risk (given your result in 1.3), would you consider investing in a portfolio consisting of Pepsi and Sprite? Why or why not?
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Transcribed Image Text:QUESTION 2
The following table contains yearly rate of returns on Pepsi and Sprite from 2020 to 2023:
Year
Rate of return on Pepsi (%)
Rate of return on Sprite (%)
2020
10
10
2021
12
10
2022 2023
14
16
9
7
1. Compute RRC for each stock;
2. Would you invest in Pepsi or Sprite? Why or why not;
3. Compute the covariance between the return on Pepsi and the return on Sprite;
3. In order to mitigate risk (given your result in 1.3), would you consider investing in
a portfolio consisting of Pepsi and Sprite? Why or why not?
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