Stocks A and B have the following historical returns: Year 2012 -20.90% -15.00%
ID: 2742552 • Letter: S
Question
Stocks A and B have the following historical returns:
Year
2012 -20.90% -15.00%
2013 36.00 20.40
2014 19.25 21.30
2015 -4.75 -12.50
2016 31.75 47.15
Calculate the average rate of return for each stock during the 5-year period. Round your answers to two decimal places.
Stock A %
Stock B %
Assume that someone held a portfolio consisting of 50% of Stock A and 50% of Stock B. What would have been the realized rate of return on the portfolio in each year? What would have been the average return on the portfolio during this period? Round your answers to two decimal places.
Year Portfolio
2012 %
2013 %
2014 %
2015 %
2016 %
Average return %
Calculate the standard deviation of returns for each stock and for the portfolio. Round your answers to two decimal places.
rA rB Portfolio
Std. Dev. % % %
Explanation / Answer
Average return of stock A=(-20.90+36+19.25-4.75+31.75)/5 12.27 Average return of stock B=(-15+20.40+21.30-12.50+47.15)/5 12.27 Variance of A=(-20.90-12.27)^2+(36-12.27)^2+(19.25-12.27)^2+(-4.75-12.27)^2+(31.75-12.27)^2 2381.233 SD of A=Square Root of Variance of A=(2381.233)^(1/2) 48.80 Variance of B=(-15-12.27)^2+(20.40-12.27)^2+(21.30-12.27)^2+(-12.50-12.27)^2+(47.15-12.27)^2 2721.46 SD of B=Square Root of Variance of B=(2721.46)^(1/2) 52.17 Portfolio Return 2012=0.5*(-20.90-15) -17.95 Portfolio Return 2013=0.5*(36+20.40) 28.2 Portfolio Return 2014=0.5*(19.25+21.30) 20.28 Portfolio Return 2015=0.5*(-4.75-12.50) -8.63 Portfolio Return 2016=0.5*(31.75+47.15) 39.45 Averate Return of the portfolio=(-17.95+28.2+20.28-8.63+39.45)/5 12.27 Variance of the portfolio=(-17.95-12.27)^2+(28.2-12.27)^2+(20.28-12.27)^2+(-8.63-12.27)^2+(39.45-12.27)^2 2406.736 SD of the portfolio=(2406.736)^(1/2) 49.06
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