(Excel Formulas) You are considering an investment in the stock market and have identified two potential...
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(Excel Formulas) You are considering an investment in the stock market and have identified two potential stocks (OMG and BRB) to purchase. The historical returns for the past five years are shown in the table below. I 2 3 4 5 6 7 A Year 2013 2014 2015 2016 2017 8 Average Return 9 Standard Deviation 10 Covariance B OMG Return 12.35% 17.01% 13.18% 8.51% 16.85% 13.58% 3.53% BRB Return 22.28% 8.75% 17.78% 19.66% 4.03% 14.50% 7,76% D Portfolio Return. 18.31% 15,94% 15.20% 9,16% Type in the Excel formulas you should enter in the cells with bold borders in the table above to solve the following problems. a. Calculate the covariance between the two stocks. (2 Points) For Questions b, c, and d, suppose that you own a portfolio consisting of 40% in OMG and 60% in BRB over the past five years. (Type in Excel formulas) b. Calculate the return of the portfolio in 2014. (2 Points) c. Calculate the average return of the portfolio over the past five years. (2 Points) d. Use two methods/formulas to calculate the standard deviation of portfolio returns over the past five years. (4 Points) For Questions e and f, suppose that you have identified three possible future scenarios. The probability distribution and possible future stock returns are presented in the table below. You are now considering investing in a portfolio consisting of 40% in OMG and 60% in BRB. (Type in Excel formulas) A 11 Scenario 12 Recession 13 Normal 14 Expansion 15 B Probability 20% 40% 40% 16 Expected Return 17 Expected Standard Deviation OMG Return. 30% 3% -15% 1.20% 2.72% D BRB Return -10% 5% 20% 8% 1.26% e. Calculate the expected return of the portfolio. (3 Points) f. Calculate the expected standard deviation of portfolio returns. (4 Points) E Portfolio Return 6.00% 4.20% 6.00% (Excel Formulas) You are considering an investment in the stock market and have identified two potential stocks (OMG and BRB) to purchase. The historical returns for the past five years are shown in the table below. I 2 3 4 5 6 7 A Year 2013 2014 2015 2016 2017 8 Average Return 9 Standard Deviation 10 Covariance B OMG Return 12.35% 17.01% 13.18% 8.51% 16.85% 13.58% 3.53% BRB Return 22.28% 8.75% 17.78% 19.66% 4.03% 14.50% 7,76% D Portfolio Return. 18.31% 15,94% 15.20% 9,16% Type in the Excel formulas you should enter in the cells with bold borders in the table above to solve the following problems. a. Calculate the covariance between the two stocks. (2 Points) For Questions b, c, and d, suppose that you own a portfolio consisting of 40% in OMG and 60% in BRB over the past five years. (Type in Excel formulas) b. Calculate the return of the portfolio in 2014. (2 Points) c. Calculate the average return of the portfolio over the past five years. (2 Points) d. Use two methods/formulas to calculate the standard deviation of portfolio returns over the past five years. (4 Points) For Questions e and f, suppose that you have identified three possible future scenarios. The probability distribution and possible future stock returns are presented in the table below. You are now considering investing in a portfolio consisting of 40% in OMG and 60% in BRB. (Type in Excel formulas) A 11 Scenario 12 Recession 13 Normal 14 Expansion 15 B Probability 20% 40% 40% 16 Expected Return 17 Expected Standard Deviation OMG Return. 30% 3% -15% 1.20% 2.72% D BRB Return -10% 5% 20% 8% 1.26% e. Calculate the expected return of the portfolio. (3 Points) f. Calculate the expected standard deviation of portfolio returns. (4 Points) E Portfolio Return 6.00% 4.20% 6.00%
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Related Book For
Financial Analysis with Microsoft Excel
ISBN: 978-1285432274
7th edition
Authors: Timothy R. Mayes, Todd M. Shank
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