Jamie Wong is thinking of building an investment portfolio containing two exchange traded funds (ETFs). Jamie...
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Jamie Wong is thinking of building an investment portfolio containing two exchange traded funds (ETFs). Jamie plans to invest $2,500 in Vanguard S&P 500 ETF (VOO) and $7,500 in Invesco QQQ Trust (QQQ). Jamie has decided to some historical returns to get a sense for her portfolio's possible future risk and return. Six years of historical annual returns for each ETF are shown in the following table: analyze a. Calculate the portfolio return, r, for each of the 6 years assuming that 25% is invested in VOO and 75% is invested in QQQ. b. Calculate the average annual return for each ETF and the portfolio over the sixyear period. c. Calculate the standard deviation of annual returns for each ETF and the portfolio. How does the portfolio standard deviation compare to the standard deviations of the individual ETFs? d. Calculate the correlation coefficient for the two ETFs. How would you characterize the correlation of returns of the two ETFs? e. Discuss any likely benefits of diversification achieved by Jamie through creation of the portfolio. a. The portfolio return for year 2014 is %. (Round to two decimal places.) The portfolio return for year 2015 is The portfolio return for year 2016 is The portfolio return for year 2017 is The portfolio return for year 2018 is The portfolio return for year 2019 is %. (Round to two decimal places.) % (Round to two decimal places.) % (Round to two decimal places.) %. (Round to two decimal places.) %. (Round to two decimal places.) b. The average return of VOO over the 6year period is %. (Round to two decimal places.) The average return of QQQ over the 6year period is %. (Round to two decimal places) The average return of the portfolio over the 6year period is %. (Round to two decimal places.) c. The standard deviation of VOO retums over the 6year period is The standard deviation of QQQ returns over the 6year period is The standard deviation of the portfolio returns over the 6year period is%. (Round to two decimal places.) %. (Round to two decimal places.) %. (Round to two decimal places.) The standard deviation of the portfolio returns is than the standard deviation of QQQ but (Round to two decimal places) d. The correlation coefficient between VOO and QQQ is How would you characterize the correlation of returns of the two ETFs? (Select the best answer below.) O A. The two ETFs are strongly negatively correlated. OB. The two ETFs are strongly positively correlated Data table (Click on the icon here in order to copy the contents of the data table below into a spreadsheet.) than the standard deviation of VOO. Year 2014 2015 2016 2017 2018 2019 Historical return Print VOO 13.47% 2.59% 11.78% 22,83% 3.92% 30.62% 000 18.06% 8.64% 6.07% 32.03% 0.83% 38.85% Done X Jamie Wong is thinking of building an investment portfolio containing two exchange traded funds (ETFs). Jamie plans to invest $2,500 in Vanguard S&P 500 ETF (VOO) and $7,500 in Invesco QQQ Trust (QQQ). Jamie has decided to some historical returns to get a sense for her portfolio's possible future risk and return. Six years of historical annual returns for each ETF are shown in the following table: analyze a. Calculate the portfolio return, r, for each of the 6 years assuming that 25% is invested in VOO and 75% is invested in QQQ. b. Calculate the average annual return for each ETF and the portfolio over the sixyear period. c. Calculate the standard deviation of annual returns for each ETF and the portfolio. How does the portfolio standard deviation compare to the standard deviations of the individual ETFs? d. Calculate the correlation coefficient for the two ETFs. How would you characterize the correlation of returns of the two ETFs? e. Discuss any likely benefits of diversification achieved by Jamie through creation of the portfolio. a. The portfolio return for year 2014 is %. (Round to two decimal places.) The portfolio return for year 2015 is The portfolio return for year 2016 is The portfolio return for year 2017 is The portfolio return for year 2018 is The portfolio return for year 2019 is %. (Round to two decimal places.) % (Round to two decimal places.) % (Round to two decimal places.) %. (Round to two decimal places.) %. (Round to two decimal places.) b. The average return of VOO over the 6year period is %. (Round to two decimal places.) The average return of QQQ over the 6year period is %. (Round to two decimal places) The average return of the portfolio over the 6year period is %. (Round to two decimal places.) c. The standard deviation of VOO retums over the 6year period is The standard deviation of QQQ returns over the 6year period is The standard deviation of the portfolio returns over the 6year period is%. (Round to two decimal places.) %. (Round to two decimal places.) %. (Round to two decimal places.) The standard deviation of the portfolio returns is than the standard deviation of QQQ but (Round to two decimal places) d. The correlation coefficient between VOO and QQQ is How would you characterize the correlation of returns of the two ETFs? (Select the best answer below.) O A. The two ETFs are strongly negatively correlated. OB. The two ETFs are strongly positively correlated Data table (Click on the icon here in order to copy the contents of the data table below into a spreadsheet.) than the standard deviation of VOO. Year 2014 2015 2016 2017 2018 2019 Historical return Print VOO 13.47% 2.59% 11.78% 22,83% 3.92% 30.62% 000 18.06% 8.64% 6.07% 32.03% 0.83% 38.85% Done X
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a To calculate the portfolio return rp for each of the 6 years we need to use the formula rp 025 rVO... View the full answer
Related Book For
Fundamentals Of Investing
ISBN: 9780135175217
14th Edition
Authors: Scott B. Smart, Lawrence J. Gitman, Michael D. Joehnk
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