You hold an equally-weightedYear201820192020(half invested in each) portfolio consisting of two stocks A and B, whose returns for the past three years are given below.Stock AStock B28%-14%-8%22%12%2%What are the average return and standard deviation of your portfolio AB? Average return isRound your answer to a whole number, e.g., xor xx. (Hint: Think of portfolio return each year)%, standard deviation is

Portfolio is a pool of various stocks with various risk and return patterns. All the stocks with…

What are the average return and standard deviation of your portfolio AB? Average return is Round your answer to a whole number, eg, x or xx (Hint: Think of portfolio return each year) %, standard deviation is

What are the average return and standard deviation of your portfolio AB? Average return is Round your answer to a whole number, eg, x or xx (Hint: Think of portfolio return each year) %, standard deviation is

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter8: Analysis Of Risk And Return

Section: Chapter Questions

Problem 25P

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Concept explainers

Risk and return

Before understanding the concept of Risk and Return in Financial Management, understanding the two-concept Risk and return individually is necessary.

Capital Asset Pricing Model

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

You hold an equally-weighted
Year
2018
2019
2020
(half invested in each) portfolio consisting of two stocks A and B, whose returns for the past three years are given below.
Stock A
Stock B
28%
-14%
-8%
22%
12%
2%
What are the average return and standard deviation of your portfolio AB? Average return is
Round your answer to a whole number, e.g., xor xx. (Hint: Think of portfolio return each year)
%, standard deviation is

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