Essentials of Modern Business Statistics with Microsoft Office Excel (Book Only)
7th Edition
ISBN: 9781337298353
Author: David R. Anderson, Dennis J. Sweeney, Thomas A. Williams
Publisher: South-Western College Pub
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Chapter 5.4, Problem 26E
(a)
To determine
To find: The standard deviations for the investments in stock 1 and stock 2. And, identify the stock that is the riskier investment using the standard deviation.
(b)
To determine
To find: The expected return and standard deviation for a person who is investing $500 in stock 1.
(c)
To determine
To find: The expected percent return and standard deviation for an individual who is constructing a portfolio by having 50% in both the stocks.
(d)
To determine
To find: The expected percent return and standard deviation for an individual who is constructing a portfolio by having 70% in stock 1 and 30% in stock 2.
(e)
To determine
To find: The value of the
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A person is interested in constructing a portfolio. Two stocks are being considered. Letx = percent return for an investment in stock 1, and y = percent return for an investment instock 2. The expected return and variance for stock 1 are e(x) = 8.45% and Var(x) = 25.The expected return and variance for stock 2 are e(y) = 3.20% and Var(y) = 1. Thecovariance between the returns is sxy = −3.a. what is the standard deviation for an investment in stock 1 and for an investment instock 2? Using the standard deviation as a measure of risk, which of these stocks isthe riskier investment?b. what is the expected return and standard deviation, in dollars, for a person who invests$500 in stock 1?c. what is the expected percent return and standard deviation for a person who constructsa portfolio by investing 50% in each stock?d. what is the expected percent return and standard deviation for a person who constructsa portfolio by investing 70% in stock 1 and 30% in stock 2?
A person is interested in constructing a portfolio. Two stocks are being considered. Letx = percent return for an investment in stock 1, and y = percent return for an investment instock 2. The expected return and variance for stock 1 are e(x) = 8.45% and Var(x) = 25.The expected return and variance for stock 2 are e(y) = 3.20% and Var(y) = 1. Thecovariance between the returns is sxy = −3.a. what is the standard deviation for an investment in stock 1 and for an investment instock 2? Using the standard deviation as a measure of risk, which of these stocks isthe riskier investment?b. what is the expected return and standard deviation, in dollars, for a person who invests$500 in stock 1?c. what is the expected percent return and standard deviation for a person who constructsa portfolio by investing 50% in each stock?d. what is the expected percent return and standard deviation for a person who constructsa portfolio by investing 70% in stock 1 and 30% in stock 2?e. Compute the correlation…
Q3 - Returns on stocks X and Y are listed below:
Period 1 2 3 4 5 6 7Stock X 5% 6% -2% -4% 6% 10% 7%Stock Y 1% -3% 6% 3% 12% 7% -5%
Consider a portfolio of 40% stock X and 60% stock Y.
What is the (population) variance of portfolio returns?Please round your answer to six decimal places.
Chapter 5 Solutions
Essentials of Modern Business Statistics with Microsoft Office Excel (Book Only)
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