1. The expected return for stock A is 22% with a standard deviation of 25%. The expected...
Question:
1. The expected return for stock A is 22% with a standard deviation of 25%. The expected return for stock B is 13% with a standard deviation of 15%.
a. Which stock is riskier?
b. If you had $1,000 to invest, would you put all $1,000 in one or the other stock, or both?
2. The expected return for a stock is 10% with a standard deviation of 13%. If returns are normally distributed, what is the probability that the stock:
a. returns more than 20%?
b. results in a loss (negative returns)?
3. Suppose the two stocks A and B from problem 1 have a correlation coefficient of 0.2. What is the standard deviation of a portfolio consisting of equal proportions of A and B?
Income Tax Fundamentals 2013
ISBN: 9781285586618
31st Edition
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill