Table 1. 2 computes the average return and variance of returns for two securities.

For security 1, change the returns for years 1 through 5 to the return series 5, 10, 6, 12, and 15. For security 2, change the return series to 8, 9, 8, 5, and 12.

Recompute the results to create a new Table 1. 2.

Transcribed Image Text:

Table 1.2 Actual or realized (ex post) return and risk over time (in percent terms) Years R R-E(R) 1 7 13 8 2345 16 R 7 8 5 3 17 10 R = 12.2 R = 6.6 -5.2 0.8 -4.2 3.8 4.8 [R-E(R) R-E(R2) [R-E(R)1 0.4 1.4 -1.6 -3.6 3.4 27.04 0.64 17.64 14.44 23.04 o(R) = 82.8/4 = 20.70 o (R) = 4.55 0.16 1.96 2.56 12.96 11.56 o(R) = 29.20/4 = 7.30 o(R) = 2.70