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show Excel ( show all work including formulars ) You are considering an investment in the stock...

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Finance

show Excel ( show all work including formulars)

You are considering an investment in the stock market and haveidentified two potential stocks, they are Westpac Banking Corp.(ASX: WBC) and Singapore Airlines Ltd. (SGX: C6L). The historicalprices for the past 10 years are shown in the table below.

in the table below.

Year

ASX: WBC

SGX: C6L

2009

23.70

13.82

2010

22.85

14.76

2011

21.01

11.1

2012

27.85

10.99

2013

30.66

9.59

2014

34.23

12.65

2015

30.85

11.03

2016

31.71

9.9

2017

30.96

11.31

2018

24.55

9.65

1. Which stocks would you prefer to own? Wouldeveryone make the same choice? Explain your answer(s).

2. Calculate the correlation coefficient between thetwo stocks. Does it appear that a portfolio consisting of WBC andC6L would provide good diversification? Explain your answer(s).

3. Calculate the expected (annual) return if you owneda portfolio consisting of 50% in WBC and 50% in C6L. Would youprefer the portfolio to owning either of the stocks alone?

Answer & Explanation Solved by verified expert
4.0 Ratings (684 Votes)
1 AnswerParticularsStock ASX WBCStock SGX C6LExpected Return278371148Risk Standard Deviation427166Stock ASX WBC is having an higher return with higher Risk whereas Stock SGX C6L is having lower return for lower riskSo risk lovers will take Stock WBC    See Answer
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