3. Using the following stock return data, answer each question. Month January 20

Question

3. Using the following stock return data, answer each question. Month January 2016 February 2016 March 2016 April 2016 - Portfole - BAC-MSFT-TRA 1.3% 0.7% 1.1% 0.7% -0.2% 2.4% -0.3% -0.5% -3.2% 0.9% 1.6% 1.7% AMIN 2.5% -1.9% 3.8% -1.0% 1) Compute blanked cells. equal weighted portfolio returns using four stocks and fill each of them in the 2) Compute the average and the standard deviation of the portfolio returns 3) What would be the maximum possible loss percentage at 10% significance if an investor hold this portfolio for one month?

Explanation / Answer

Q1 Month BAC MSFT TSLA AMZN Portfolio Jan-16 1.30% 0.70% 1.10% 2.50% 1.40% Feb-16 0.70% -0.20% 2.40% -1.90% 0.25% Mar-16 -0.30% -0.50% -3.20% 3.80% -0.05% Apr-16 0.90% 1.60% 1.70% -1.00% 0.80% Using equal portfolio weights as 0.25 for all four stocks and using the formula weight*stock return and summing across all 4 stocks we get the portfolio retunr Q2 Average portfolio return 0.60% sum of all return/4 Standard deviation of return 0.64% using std.dev function in excel Q3 maximum loss possible at 10% significance -0.22% This is calculated using normal table at 10% probablity with mean and std deviation as calculated above

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