III. The holding Period Rate of Return (HPR) of stocks A and B for the past...
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III. The holding Period Rate of Return (HPR) of stocks A and B for the past five years are: Stock B 5% 10% 2% 1% Year 2019 2020 2021 2022 2023 Stock A 30% -6% 35% 26% -5% 6% (1) Base on the information provided above, calculate the expected rate of return and standard deviation for each stock. (2) Calculate coefficient of variation of each stock. If you only want to buy one stock, which one will you select? Why? (3) Determine the correlation coefficient of returns of Stocks A and B. Can you reduce risk by creating a portfolio of the combination of both stocks? Why or why not? (4) If you invest 20% of money on Stock A, and another 80% on Stock B, calculate expected rate of return and standard deviation of this portfolio. Is this portfolio better than individual stock A and B? Why? (18 points) III. The holding Period Rate of Return (HPR) of stocks A and B for the past five years are: Stock B 5% 10% 2% 1% Year 2019 2020 2021 2022 2023 Stock A 30% -6% 35% 26% -5% 6% (1) Base on the information provided above, calculate the expected rate of return and standard deviation for each stock. (2) Calculate coefficient of variation of each stock. If you only want to buy one stock, which one will you select? Why? (3) Determine the correlation coefficient of returns of Stocks A and B. Can you reduce risk by creating a portfolio of the combination of both stocks? Why or why not? (4) If you invest 20% of money on Stock A, and another 80% on Stock B, calculate expected rate of return and standard deviation of this portfolio. Is this portfolio better than individual stock A and B? Why? (18 points)
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Answer rating: 100% (QA)
To calculate the expected rate of return and standard deviation for each stock we can use the following formulas Expected rate of return sum of HPRs for each year number of years Standard deviation su... View the full answer
Related Book For
Income Tax Fundamentals 2013
ISBN: 9781285586618
31st Edition
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill
Posted Date:
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