The following are the monthly rates of return for Madison Cookies and for Sophie Electric during a six-month period. Month 1 2 3 4 5 6 Madison Cookies -0.04 0.06 -0.07 0.12 -0.02 0.05 Sophie Electric 0.07 -0.02 -0.10 0.15 -0.06 0.02 Compute the following. a. Average monthly rate of return R, for each stock b. Standard deviation of returns for each stock c. Covariance between the rates of return d. The correlation coefficient between the rates of return What level of correlation did you expect? How did your expectations compare with the computed correlation? Would these two stocks be good choices for diversification? Why or why not?

The following are the monthly rates of return for Madison Cookies and for Sophie Electric during a six-month period. Month 1 2 3 4 5 6 Madison Cookies -0.04 0.06 -0.07 0.12 -0.02 0.05 Sophie Electric 0.07 -0.02 -0.10 0.15 -0.06 0.02 Compute the following. a. Average monthly rate of return R, for each stock b. Standard deviation of returns for each stock c. Covariance between the rates of return d. The correlation coefficient between the rates of return What level of correlation did you expect? How did your expectations compare with the computed correlation? Would these two stocks be good choices for diversification? Why or why not?

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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How is this set-up to solve? Ford Stock I) & II) were in previous question GM stock produced the following monthly returns (January - May): 5%, 8%, -2%, 12%, and 15%. Ford stock produced the following monthly returns (January - May): 1%, 10%, 6%, 3%, and 2%. I) Calculate the average return for each stock. II) Calculate the standard deviation of monthly return for each stock. III) Calculate the correlation coefficient between GM and Ford stocks.
(10). The table below presents the price of stock A and the points of a market index over the last four moths. Month 1 3 4 A 100 105 108 103 1112 1150 1200 1190 a. The holding period logarithmic return of stock A equals: A. 12%; B. 8.85%; C. 13,97%; D. b. The beta coefficient of stock A equals: A. 0,64; B. 0,19; C. 1,64; D. ...... % c. The estimated alpha coefficient from the market model equals d. The coefficient of determination from the market model equals
How do i start this question? Ford stock produced the following monthly returns (January - May): 1%, 10%, 6%, 3%, and 2%. I) Calculate the average return for each stock. II) Calculate the standard deviation of monthly return for each stock.
The table given below reports last five years data on annual rates of return (HPYS) on two stocks Year Stock A (%) Stock B (%) 1 16 -10 24 40 30 10 5 -20 20 pre 3. Compute the coefficient of variation for each stock. By this measure which stock is preferable.
The following are the end-of-month prices for both the Standard & Poor's 500 Index and Nike's common stock. a. Using the data in the popup window, calculate the holding-period returns for each of the months. b. Calculate the average monthly return and the standard deviation for both the S&P 500 and Nike. c. Develop a graph that shows the relationship between the Nike stock returns and the S&P 500 Index. (Show the Nike returns on the vertical axis and the S&P 500 Index returns on the horizontal axis.) d. From your graph, describe the nature of the relationship between Nike stock returns and the returns for the S&P 500 Index.
Note: Please answer this question only by typing your answers in the typing space available for this question Assume that the annual rates of return for two stocks (Reliance and Wipro) for the past 5 years are as given below: Year 2 3 4 5 Reliance 35% 11% -7% -12% 24% Wipro 28% 7% -11% 15% -5% Based on the above information answer the following questions: (a) Compute the arithmetic mean of the annual rate of return for each stock. Which stock is preferable by this measure? (b) Compute the geometric mean of the annual rate of return for each stock. Which stock is preferable by this measure? (c) Compute the standard deviation of the annual rate of return for each stock. Which stock is preferable by this measure?
QUESTION 1 You have observed a particular stock over the past year. Monthly returns have been as follows: -7%, -7%, 11%, -8%, 0%, 2%, 2%, -5%, -1%, -2%, -4%, 11%. Using Excel, calculate the average monthly returns to the nearest hundredth of a percent (.01). The average function is =average(). QUESTION 2 You have observed a particular stock over the past year. Monthly returns have been as follows: 1%, -6%, 9%, -7%, 12%, -4% , -9%, -1%, 11%, 2%, -6%, -11%. Using Excel, calculate the standard deviation. For the standard deviation of a sample, use =stdev.s(). 7.886986 8.005207 6.680478 6.939129
UNIT 7-5
Estimate a stock's beta (i.e., the sensitivity of the stock's returns to the returns on the market) based on the following information about the changes in stock returns and market returns over the course of three months: Month 1: Stock -2.5%, Market -2%. Month 2: Stock -.5%, Market -.25%. Month 3: Stock +1.5%, Market +1.25%.
Here are the returns on two stocks. January February March April May June July August Digital Cheese +14 -4 +6 +8 -5 +4 -3 -9 Executive Fruit +8 +2 +5 +12 +3 +6 w At t -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? 4 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?
Determine the expected standard deviation of a stock that an investment manager has determined that has three possible return outcomes over the next 12 months; -6.45%, 9.85% and 13.05%, for which she has assigned the following probabilities of occurring; 12.5%, 72.5% and 15.0% respectively 5.69% 8.87% 12.74% 0.32%
If the return on stock A in year 1 was 10 %, in year 2 was -6 %, in year 3 was -2 % and in year 4 was 10 %, what was the standard deviation of returns for stock A over this four year period? (Round your answer to 1 decimal place and record without a percent sign. If your final answer is negative, place a minus sign before the number with no space between the sign and the number).

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