Question: dont need it Using the data in the following table, consider a portfolio that maintains a 70% weight on stock A and a 30% weight

 dont need it Using the data in the following table, consider
a portfolio that maintains a 70% weight on stock A and a
dont need it

Using the data in the following table, consider a portfolio that maintains a 70% weight on stock A and a 30% weight on stock B. a. What is the return each year of this portfolio? b. Based on your results from part (a), compute the average return and volatility of the portfolio. c. Show that (i) the average return of the portfolio is equal to the (weighted) average of the average returns of the two stocks, and (ii) the volatility of the portfolio equals the same result as from the calculation in Eq. 11.9. d. Explain why the portfolio has a lower volatility than the average volatility of the two stocks. Data table (Click on the following icon in order to copy its contents into a spreadsheet.) a. What is the refurn each year of this portfolio? Enter the retum of this portfolio for each year in the table below. (Round to two decimal places). b. Based on your results from part (a), compute the average retum and volatility of the porffolo The average return of the portfolio is L. (Round to two decimal places.) The volatility of the porttolio is 6. (Round to two decimal places) c. Show that (0) the average return of the portfolo is equal to the (weighted) average of the average returns of the two stocks, and (i) the volasily of the portfolio equals the same rasut as from the calculation in Eq. 11.9 . The average annual return for stock A is \%. (Round to two decimal places.) The average annual return for stock B is 15. (Round to two decimal places) The (woighted) average of the average returns of the two stocks is 6. (Round to two decimal places.) The volataty of the portfolio is 11.92%. (Round to two decimal places) d. Explain why the portfolio has a lower volatility than the average volatily of the two stocks. (Select from the drop-down menu.) The portolio has a volatily than the average volatify of the two stocks because some of the idiosyncratio risk of the stocks in the portolio in diversifed away

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!