
Mean and Standard Deviation of Monthly Returns:
Mean monthly return:
Mean monthly return of a stock during some historical period is the average of the realized returns for each month of the period. The formula used to calculate the mean monthly return is given below.
Here, R is realized return in a year and T is the number of years.
Standard deviation:
Standard deviation is a tool that helps in measuring the risk involved in a particular investment. It indicates how much predictability is possible in an investment. When the standard deviation is more than 1, it implies the series of data across the boundary. In such cases, however, control and prediction becomes a complex process. When the value of standard deviation is lower than the mean values, it implies that there is a high prediction possibility. When the value of standard deviation is lower, it gives confidence to the investor to opt for a share.
Portfolio:
A portfolio is the total collection of the investments held by an investor, which includes bonds, stocks, options, futures, and other investments like gold or limited
The return of a portfolio is the weighted average of the
To do: Compute the mean and standard deviation of monthly returns for the equally weighted portfolio.

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Chapter 11 Solutions
EBK FUNDAMENTALS OF CORPORATE FINANCE
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