You are given the following data on several stocks: a. Calculate the expected return and standard deviation
Question:
You are given the following data on several stocks:
a. Calculate the expected return and standard deviation for each stock.
b. Calculate the expected return and standard deviation for a portfolio invested equally in Gere Mining and Reubenfeld Films. How does the standard deviation of this portfolio compare to a simple 50-50 weighted average of the standard deviations of the two stocks?
c. Calculate the expected return and standard deviation for a portfolio invested equally in Gere Mining and DeLorean Automative. How does the standard deviation of this portfolio compare to a simple 50-50 weighted average of the standard deviations of the two stocks?
d. Explain why your answers regarding the portfolio standard deviations are so different in parts b and c.
The expected return is the profit or loss an investor anticipates on an investment that has known or anticipated rates of return (RoR). It is calculated by multiplying potential outcomes by the chances of them occurring and then totaling these... Portfolio
A portfolio is a grouping of financial assets such as stocks, bonds, commodities, currencies and cash equivalents, as well as their fund counterparts, including mutual, exchange-traded and closed funds. A portfolio can also consist of non-publicly...
Step by Step Answer:
Introduction to Corporate Finance What Companies Do
ISBN: 978-1111222284
3rd edition
Authors: John Graham, Scott Smart