Using the data in the following table, calculate the volatility (standard deviation) of a portfolio that is 75% invested in stock A and 25% in stock B.
Using the data in the following table, calculate the volatility (standard deviation) of a portfolio that is 75% invested in stock A and 25% in stock B.
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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Capital asset pricing model, also known as CAPM, shows the relationship between the expected return of the investment and the market at risk. This concept is basically used particularly in the case of stocks or shares. It is also used across finance for pricing assets that have higher risk identity and for evaluating the expected returns for the assets given the risk of those assets and also the cost of capital.
Question
Using the data in the following table, calculate the volatility (standard deviation) of a portfolio that is
75% invested in stock A and 25% in stock B.
Transcribed Image Text:(Click on the following icon g in order to copy its contents into a spreadsheet.)
Year
2010
2011
2012
2013
2014
2015
Stock A
- 10%
5%
2%
- 1%
2%
9%
Stock B
16%
20%
26%
- 6%
- 7%
32%
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