70.2K

Verified Solution

Link Copied!

Q4

	Flowers Inc	Chocolates Inc	Wine Inc
2002	5.0%	-10.0%	-8.0%
2003	8.0%	-7.0%	20.0%
2004	12.0%	-3.0%	22.0%
2005	-2.0%	2.0%	20.0%
2006	-4.0%	5.0%	30.0%
2007	-5.0%	45.0%	25.0%
2008	-10.0%	30.0%	22.0%
2009	25.0%	20.0%	-2.0%
2010	27.0%	10.0%	-3.0%
2011	29.0%	12.0%	-20.0%
2012	4.0%	14.0%	-1.0%
2013	5.0%	16.0%	10.0%
2014	8.0%	25.0%	22.0%
2015	-8.0%	4.0%	28.0%

a) The attached spreadsheet lists the annual returns of the shares of 3 companies: Flowers Inc, Chocolates Inc and Wine Inc. If an investor chooses to invest in just one of the companies, Wine Inc, instead of investing in an equally weighted portfolio of all 3 shares, how much higher is the risk of that investment than the risk of the portfolio ( using standard deviation to measure risk)? Express your answer as a percentage, rounded to 2 decimal places, eg. 5.55

b) The annual return of the shares of 3 companies are listed in the attached excel spreadsheet, Flowers Inc, Chocolates Inc and Wine Inc. What is the risk of an equally weighted portfolio of Chocolates Inc and Wine Inc, measured as the standard deviation of returns? Express your answer as a percentage to 2 decimal places, eg. 5.55.

Answer & Explanation Solved by verified expert

See Answer