Question: 3. Using the data in the following table, consider a portfolio that maintains a 65% weight on stock A and a 35% weight on stock

3. Using the data in the following table, consider a portfolio

3. Using the data in the following table, consider a portfolio that maintains a 65% weight on stock A and a 35% weight on stock B. Year 2009 2010 2011 2012 2013 2014 2015 2016 Realized returns Stock A Stock B -2% 20% 8% 3% 18% -6% -7% 4% -9% 10% 23% 7% 2% 1% 10% a. Estimate the average return and volatility for each stock. b. Estimate the average return of the portfolio. Show that the average return of the portfolio is equal to the average of the average return of the two stocks. c. Estimate the covariance and correlation between two stocks d. Estimate the volatility of the portfolio. Show that this volatility is equal to the following volatility formula: 0,= *4042 + Igop? +21 AIB PABOAB where I and en represent the portfolio weight on stock A and B, respective. And A, B, PA, indicate the volatility of stock A, stock B, and correlation between stock A and B, respectively

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