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You are considering an investment in either individual stocks or a portfolio of stocks. The...

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Accounting

You are considering an investment in either individual stocks or a portfolio of stocks. The two stocks you are researching, Stocks A and B have the following historical returns:

Year A B
2011 -19.30% -16.30%
2012 30.25 22.90
2013 12.00 32.80
2014 -4.50 -5.90
2015 25.75 10.70

a. Calculate the average rate of return for each stock during the 5-year period. Round your answers to two decimal places.

Stock A = _______%

Stock B = _______%

b. Suppose you had held a portfolio consisting of 50% of Stock A and 50% of Stock B. What would have been the realized rate of return on the portfolio in each year? What would have been the average return on the portfolio during this period? Round your answers to two decimal places.

Year Portfolio
2011 ______%
2012 ______%
2013 ______%
2014 ______%
2015 ______%
Average return ______%

c. Calculate the standard deviation of returns for each stock and for the portfolio. Round your answers to two decimal places. Enter negative returns with a minus sign.

rA rB Portfolio
Std. Dev. _____% _____% _____%

d. Suppose you are a risk-averse investor. Assuming Stocks A and B are your only choices, would you prefer to hold Stock A, Stock B, or the portfolio?

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