1. Consider the following realized annual returns: Index Realised Return (%) Sto

Question

1. Consider the following realized annual returns:

Index Realised Return (%)

Stock A Realised Return (%)

23.6

46.3

24.7

26.7

30.5

86.9

9.0

23.1

-2.0

0.2

-17.3

-3.2

-24.3

-27.0

32.2

27.9

4.4

-5.1

7.4

-11.3

The average annual return on the Index from 2000 to 2009 is closest to:

4.00%

8.75%

7.10%

9.75%

2. What is the standard deviation of returns on the following two asset portfolio?:Asset A - weighting of 30% of value of portfolio - std dev. of returns 20%Asset B -weighting of 70% of value of portfolio - std dev. of returns 25%Correlation between Asset A & Asset B of 0.2

19.6%

21.2%

22.7%

27.3%

Year End

Index Realised Return (%)

Stock A Realised Return (%)

2000

23.6

46.3

2001

24.7

26.7

2002

30.5

86.9

2003

9.0

23.1

2004

-2.0

0.2

2005

-17.3

-3.2

2006

-24.3

-27.0

2007

32.2

27.9

2008

4.4

-5.1

2009

7.4

-11.3

Explanation / Answer

1.C

2.D

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