A. What is the average return, variance and standard deviation of returns for (i) S&P

500, (ii) Verizon, and (iii) Pfizer. Comment on the statistics.

B. Calculate the covariance and the correlation coefficient of returns between (i)

S&P 500 and Verizon, (ii) S&P and Pfizer, and (iii) Verizon and Pfizer. Comment on

the statistics.

FIN 5130 Instructor: Dr. Palkar

Mini-Case 1

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C. If you were to form a portfolio that had 50% of the S&P 500 Index and 50% of

Verizon, what would be the average return and the standard deviation of returns for

your portfolio? (Ignore the fact that both Verizon may already be included in the S&P

500)

D. If you were to add Pfizer to your portfolio so that you now had 33% S&P 500,

33% Verizon, and 34% Pfizer, what would be the new average return and standard

deviation of returns for your portfolio? (Ignore the fact that both Verizon and Pfizer

may already be included in the S&P 500) Is Pfizer a good addition to your portfolio?

Why do you think so?

E. Calculate Verizon's beta for the March 1 2013 - March 1, 2017 period. Calculate

Pfizer's beta for the March 1 2013 - March 1, 2017 period. Comment on the

statistics.