Here are the returns on two stocks. Digital Cheese Executive Fruit January +19 +8 February ?3 +1 March +5 +4 April +7 +17 May ?4 +2 June +3 +4 July ?2 ?3 August ?8 ?2 a-1. Calculate the variance and standard deviation of...

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Finance

Here are the returns on two stocks.
Digital Cheese Executive Fruit
January +19 +8
February ?3 +1
March +5 +4
April +7 +17
May ?4 +2
June +3 +4
July ?2 ?3
August ?8 ?2
a-1. Calculate the variance and standarddeviation of each stock. (Do not round intermediatecalculations. Round your answers to 2 decimal places.)
a-2. Which stock is the riskier if held on itsown?
Digital Cheese
Executive Fruit
b. Now calculate the returns in each month of aportfolio that invests an equal amount each month in the twostocks. (Negative amounts should be indicated by a minussign. Do not round intermediate calculations. Round your answers to2 decimal places.)
c. Is the standard deviation more or less thanhalf way between the variance of the two individual stocks?

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3.6 Ratings (512 Votes)

a1Digital CheeseExecutive FruitJanuary198February31March54April717May42June34July23August82Variance andStandard Deviation of each stockStandard deviation of a sample sample size n can be calculatedusing the below formulaIn this example n 8Variance is the Square of Standard DeviationVariance StandardDeviation2For DigitalCheeseERD D 1935743288 2125so Variance of Digital Cheese isD2 See Answer

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Transcribed Image Text

Here are the returns on two stocks.Digital CheeseExecutive FruitJanuary+19+8February?3+1March+5+4April+7+17May?4+2June+3+4July?2?3August?8?2a-1. Calculate the variance and standarddeviation of each stock. (Do not round intermediatecalculations. Round your answers to 2 decimal places.)a-2. Which stock is the riskier if held on itsown?Digital CheeseExecutive Fruitb. Now calculate the returns in each month of aportfolio that invests an equal amount each month in the twostocks. (Negative amounts should be indicated by a minussign. Do not round intermediate calculations. Round your answers to2 decimal places.)c. Is the standard deviation more or less thanhalf way between the variance of the two individual stocks?

	Digital Cheese		Executive Fruit
January		+19		+8
February		?3		+1
March		+5		+4
April		+7		+17
May		?4		+2
June		+3		+4
July		?2		?3
August		?8		?2