Required: a-1. Calculate the variance and standard deviation of each stock. a-2. Which stock is riskier if held on its own? b. Now calculate the returns in each month of a portfolio that invests an equal amount each month in the two stocks. c. Is the variance more or less than halfway between the variance of the two individual stocks?
Required: a-1. Calculate the variance and standard deviation of each stock. a-2. Which stock is riskier if held on its own? b. Now calculate the returns in each month of a portfolio that invests an equal amount each month in the two stocks. c. Is the variance more or less than halfway between the variance of the two individual stocks?
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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Question
Here are the returns on two stocks.
A. Calculate the variance and standard deviation of each stock. Which stock is riskier if held on its own?
B. Now calculate the returns in each month of a portfolio that invests an equal amount each month in the two stocks
C. Is the variance more or less than halfway between the variance of the two Individual stocks?
Transcribed Image Text:Cheese
+16
-4
+6
+8
-5
+4
-3
Fruit
January
February
March
April
May
June
July
August
+6+
+1
+7
+16
+2
+7
-4
-3
Required:
a-1. Calculate the variance and standard deviation of each stock.
a-2. Which stock is riskier if held on its own?
b. Now calculate the returns in each month of a portfolio that invests an equal amount each month in the two stocks.
c. Is the variance more or less than halfway between the variance of the two individual stocks?
Complete this question by entering your answers in the tabs below.
Req A2
Req B
Req C
Req A1
Calculate the variance and standard deviation of each stock. (Do not round intermediate calculations. Round your answers to
2 decimal places.)
Digital Cheese
Retum
Executive Fruit
Return
Variance
Standard deviation
Req A2 >
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Drev
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