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Stocks A and B have the following historical returns: a. Calculate the average rate of return for each stock during

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Stocks A and B have the following historical returns:
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a. Calculate the average rate of return for each stock during the 5-year period.b. Assume that someone 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?c. Calculate the standard deviation of returns for each stock and for the portfolio.d. Calculate the coefficient of variation for each stock and for the portfolio.e. If you are a risk-averse investor then, assuming these are your only choices, would you prefer to hold Stock A, Stock B, or the portfolio?Why?

Stocks
Stocks or shares are generally equity instruments that provide the largest source of raising funds in any public or private listed company's. The instruments are issued on a stock exchange from where a large number of general public who are willing... 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...
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TA Year -18.00% -14.50% 2006 21.80 2007 33.00 2008 15.00 30.50 2009 -0.50 -7.60 2010 27.00 26.30

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The answers to a b c and d are given below e A risk averse investor would choose the portfolio ove…View the full answer


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Corporate Finance A Focused Approach

Corporate Finance A Focused Approach

ISBN: 978-1439078082

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Authors: Michael C. Ehrhardt, Eugene F. Brigham

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Question Posted: September 23, 2011 10:05:13
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