Question: Need C. Portfolio return and standard deviation Personal Finance Problem Jamie Wong is thinking of building an investment portfolio containing two stocks, Land M. Stock

Need C.

Need C. Portfolio return and standard deviation Personal Finance Problem Jamie Wong

Portfolio return and standard deviation Personal Finance Problem Jamie Wong is thinking of building an investment portfolio containing two stocks, Land M. Stock L will represent 25% of the dollar value of the portfolio, and stock M will account for the other 75%. The historical returns over the next 6 years, 2013-2018, for each of these stocks are shown in the following table: a. Calculate the actual portfolio return, rp, for each of the 6 years. b. Calculate the expected value of portfolio returns, Pp, over the 6-year period. c. Calculate the standard deviation of expected portfolio returns, or, over the 6-year period. d. How would you characterize the correlation of returns of the two stocks L and M? e. Discuss any benefits of diversification achieved by Jamie through creation of the portfolio a. The actual portfolio return for year 2013 is 20.75 %. (Round to two decimal places.) The actual portfolio return for year 2014 is 20.50 %. (Round to two decimal places.) Data Table . X The actual portfolio return for year 2015 is 20.25%. (Round to two decimal places.) The actual portfolio return for year 2016 is 19.50 %. (Round to two decimal places.) (Click on the icon located on the top-right corner of the data table below in order to copy its contents into a spreadsheet.) The actual portfolio return for year 2017 is 19.00 %. (Round to two decimal places.) The actual portfolio return for year 2018 is 18.75 %. (Round to two decimal places.) b. The expected value of portfolio returns, lp, over the 6-year period is 19.79 %. (Round to two decimal places.) Year 2013 2014 2015 2016 2017 2018 Expected return Stock L Stock M 14% 23% 16% 22% 18% 21% 18% 20% 19% 19% 21% 18% c. The standard deviation of expected portfolio returns, ore, over the 6-year period is %. (Round to two decimal places.)

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!