The following table contains monthly returns for Cola Co. and Gas Co. for 2013 (the returns...

 

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The following table contains monthly returns for Cola Co. and Gas Co. for 2013 (the returns are shown in decimal form, i.e., 0.035 is 3.5%). Using this table and the fact that Cola Co. and Gas Co. have a correlation of -0.0969, calculate the volatility (standard deviation) of a portfolio that is 50% invested in Cola Co. stock and 50% invested in Gas Co. stock. Calculate the volatility by: a. Using the formula: Var (Rp) = w² SD (R₁)²+w2 SD (R2)² + 2w₁ w₂ Corr (R₁.R₂) SD (R₁) SD (R2) b. Calculating the monthly returns of the portfolio and computing its volatility directly. c. How do your results compare? Data table - X a. Using the formula: Var()()}, SD (M₂)² + 2w, wy Car (R, A₂) SD (R₁) SD (R₂) The volatility (standard deviation) of the portfolio is %. (Round to two decimal places.) (Click on the following icon in order to copy its contents into a spreadsheet.) Cola Co. -0.0210 Month Gas Co. January 0.0280 February 0.0000 -0.0050 March -0.0200 -0.0180 April 0.0090 0.0280 May -0.0310 0.0840 June -0.0840 -0.0460 July -0.1190 0.0820 August -0.0160 0.0460 September 0.0550 0.0300 October -0.0110 0.0140 November -0.0380 0.0290 December -0.0220 0.0740 The following table contains monthly returns for Cola Co. and Gas Co. for 2013 (the returns are shown in decimal form, i.e., 0.035 is 3.5%). Using this table and the fact that Cola Co. and Gas Co. have a correlation of -0.0969, calculate the volatility (standard deviation) of a portfolio that is 50% invested in Cola Co. stock and 50% invested in Gas Co. stock. Calculate the volatility by: a. Using the formula: Var (Rp) = w² SD (R₁)²+w2 SD (R2)² + 2w₁ w₂ Corr (R₁.R₂) SD (R₁) SD (R2) b. Calculating the monthly returns of the portfolio and computing its volatility directly. c. How do your results compare? Data table - X a. Using the formula: Var()()}, SD (M₂)² + 2w, wy Car (R, A₂) SD (R₁) SD (R₂) The volatility (standard deviation) of the portfolio is %. (Round to two decimal places.) (Click on the following icon in order to copy its contents into a spreadsheet.) Cola Co. -0.0210 Month Gas Co. January 0.0280 February 0.0000 -0.0050 March -0.0200 -0.0180 April 0.0090 0.0280 May -0.0310 0.0840 June -0.0840 -0.0460 July -0.1190 0.0820 August -0.0160 0.0460 September 0.0550 0.0300 October -0.0110 0.0140 November -0.0380 0.0290 December -0.0220 0.0740

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