Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. finance
  3. year stock a stock b 2015 3 % 40% 2016 5 % -5% 201

year stock A stock B 2015 3 % 40% 2016 5 % -5% 2017 1 % 30% 2018 10...

50.1K

Verified Solution

Question

Finance

year stock A stock B

2015 3 % 40%

2016 5 % -5%

2017 1 % 30%

2018 10 % -10%

2019 6 % 35 %

(1) Determine the correlation coefficient of returns of stocks Aand B. Can you reduce risk by creating a portfolio of thecombination of both stocks? why or why not?

(2) if you invest 80% of money in stock A and another 20% instock B, calculate expected rate of return and standard deviationof this portfolio. Is this portfolio better than the individualstock A and B? why

Answer & Explanation Solved by verified expert
4.0 Ratings (598 Votes)
YearStock AStock B201534020165520171302018101020196351 Expected Return of Stock A ERA 3511065 5Expected Return of Stock B ERB 4053010355 18If n is the sample size then the variance of the sample iscalculated using below formulawhere Ri is the return in different years and ER isthe expected return as calculated aboveVariance of Stock A A2 143525521521052652A2 000400001600025000014 000115Therefore standard deviation of Stock A A 00011512 003391165 339Variance of Stock B B2    See Answer
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Zin AI - Your personal assistant for all your inquiries!
Become a Member

Transcribed Image Text

year stock A stock B2015 3 % 40%2016 5 % -5%2017 1 % 30%2018 10 % -10%2019 6 % 35 %(1) Determine the correlation coefficient of returns of stocks Aand B. Can you reduce risk by creating a portfolio of thecombination of both stocks? why or why not?(2) if you invest 80% of money in stock A and another 20% instock B, calculate expected rate of return and standard deviationof this portfolio. Is this portfolio better than the individualstock A and B? why

Other questions asked by students

Q

A 100.0 mL sample of 0.20 M HF is titrated with 0.10 M KOH. Determine the...

Chemistry
Q

Please follow this link and listen (OR you can simply search the topic in google, the...

Psychology
Q

In how many ways can 9 students be seated in a row of 9 chairs...

Statistics
Q

Solve the following system of equations using the Gauss Jordan method 15x 15y z 13...

Algebra
Q

Determine whether the identity is true or false 7 sin 0 8 cos2 0 7...

Algebra
Q

Sebree Corporation has provided the following contribution format income statement. Assume that the following information...

Accounting
Q

A 10 year 5% bond with Face value of $100,000 was issed at 102 on...

Accounting
Q

The BRS Corporation makes collections on sales according to the following schedule: 30% in month...

Accounting
Q

Present Value of Bonds Payable; Discount Pinder Co. produces and sells high-quality video equipment. To...

Accounting
Q

Wildhorse Corporation produces microwave units. The following per-unit cost information is available: direct materials $38;...

Accounting
Q

How would you find the break even point and build a break even chart with...

Accounting
Q

The information that follows relates to equipment owned by Waterway Limited at December 31, 2020:...

Accounting