Question: 1.) Using the data in the following table, estimate the average return and volatility for each stock. Stock A Stock B 2005 -15 17 2006

1.) Using the data in the following table, estimate the average return and volatility for each stock.

Stock A Stock B 2005 -15 17 2006 12 31 2007 7 4 2008 -4 -10 2009 3 -6 2010 9 32

2.) Using the data in the following table, and the fact that the correlation of A and B is 0.61, calculate the volatility (standard deviation) of a portfolio that is 80% invested in stock A and 20% invested in stock B.

Stock A Stock B 2005 -1 25 2006 13 38 2007 5 3 2008 -10 -3 2009 3 -4 2010 9 17

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