3. The standard deviation is often used by investors to measure the risk of a stock...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
3. The standard deviation is often used by investors to measure the risk of a stock or a stock portfolio. The basic idea is that the standard deviation is a measure of volatility: the more a stock s returns vary from the stock s average return, the more volatile the stock. Consider the following two stock portfolios and their respective returns (in percent) over the last six months. A Value Return (3) Final Value 0.75 1,008 1,018 1,048 1,032 1,038 1,058 1,000 1,008 1,018 1,048 1,032 1,038 B Value Return (%) Final Value 1.50 1,015 5.00 1,066 12.00 1,194 -9.00 1,086 -4.00 1.50 1,000 1,015 1.00 3.00 -1.50 0.50 2.00 1,194 1,096 1,043 1,043 1,058 Questions: a) Use your calculator to compute the mean, median, range, sample standard deviation and sample variance for the six percent-returns (Return % column) of both stock portfolios (do not convert the values in the returns column to decimal form). Round your answers to 3 decimal places. Refer to page 169-170 for instructions on how to compute descriptive statistics on the TI-84/83. Returns (%) Portfolio A (Returns %) Portfolio B (Returns %) Mean Median Range Standard deviation Variance b) Compare the final values of the portfolio during the six-month period. Describe any trend or trends? c) Compare the range and the standard deviation of the six returns of both portfolios. Which stock portfolio is considered more volatile? Explain why. 3. The standard deviation is often used by investors to measure the risk of a stock or a stock portfolio. The basic idea is that the standard deviation is a measure of volatility: the more a stock s returns vary from the stock s average return, the more volatile the stock. Consider the following two stock portfolios and their respective returns (in percent) over the last six months. A Value Return (3) Final Value 0.75 1,008 1,018 1,048 1,032 1,038 1,058 1,000 1,008 1,018 1,048 1,032 1,038 B Value Return (%) Final Value 1.50 1,015 5.00 1,066 12.00 1,194 -9.00 1,086 -4.00 1.50 1,000 1,015 1.00 3.00 -1.50 0.50 2.00 1,194 1,096 1,043 1,043 1,058 Questions: a) Use your calculator to compute the mean, median, range, sample standard deviation and sample variance for the six percent-returns (Return % column) of both stock portfolios (do not convert the values in the returns column to decimal form). Round your answers to 3 decimal places. Refer to page 169-170 for instructions on how to compute descriptive statistics on the TI-84/83. Returns (%) Portfolio A (Returns %) Portfolio B (Returns %) Mean Median Range Standard deviation Variance b) Compare the final values of the portfolio during the six-month period. Describe any trend or trends? c) Compare the range and the standard deviation of the six returns of both portfolios. Which stock portfolio is considered more volatile? Explain why.
Expert Answer:
Answer rating: 100% (QA)
The Standard Deviation Is Often Used By Investors To Measure The Risk Of A Stock Or a stock portfoli... View the full answer
Related Book For
Business Statistics
ISBN: 978-0321925831
3rd edition
Authors: Norean Sharpe, Richard Veaux, Paul Velleman
Posted Date:
Students also viewed these mathematics questions
-
The Price-to-Book-value ratio is often used by investors to indicate whether a stocks price is particularly high or low relative to the value of the company. But different market sectors expect...
-
The standard deviation is the most popular measure of variability from the mean. It uses squared deviations, since the ordinary deviations sum to zero. An alternative measure is the mean absolute...
-
Which type of organization structure is often used by companies that produce standard products? Why?
-
Solve Utt = cUTT 0
-
Find the equation of the tangent line to y = (x2 + 1)3 (x4 + 1)2 at (1, 32).
-
San Juan Sailboat Charters (SJSBC) is an agency that leases (charters) sailboats. SJSBC does not own the boats. Instead, SJSBC leases boats on behalf of boat owners who want to earn income from their...
-
If you were trying to examine this issue, how would you proceed? Any suggestions for me to take next steps? same. Is that what happened? You normally wouldnt borrow money from the company, would you?
-
Assigned Accounts ReceivableJournal Entries Salen Company finances some of its current operations by assigning accounts receivable to a finance company. On July 1, 2010, it assigned, under guarantee,...
-
A 'drought simply is a situation in which quantity of water demanded exceeds quantity of water supplied. Draw a demand-supply diagram for the water market portraying a drought. Does a drought have...
-
Tyre Recycling Inc. (TRI) operates a tire recycling plant in Murdochville, QC. Three years ago it acquired all of the shares of Tyre Distributors Corp. which sells tires to Canadian Tire and other...
-
Perform a comprehensive financial analysis of your current company (or any public listed company) and provide own insights. Make use the guideline below to structure your analysis: a. Give high-level...
-
At September 1 , 2 0 2 5 , a cokpany reported Retained Earnings of $ 3 5 5 3 2 0 . During the month, the company generated revenues of $ 5 0 4 0 0 , incurred expenses of $ 3 0 2 4 0 , puchased...
-
For 4 hours of work, a consultant charges $400. For 5 hours of work, she charges $450. Write a point-slope equation to show this, then find the amount she will charge for 10 hours of work.
-
Ford Motor Company had realized returns of 15%, 22%, 5%, and -10% over four quarters. What is the quarterly standard deviation of returns for Ford? Ford Motor Company had realized returns of 15%,...
-
Suppose the British pound is currently trading for 1 . 5 0 US dollars in the spot market, and the 1 8 0 - day forward rate is 1 . 4 7 $ / . Which currency is at a forward premium? Which currency...
-
A corporation acquired a copyright by issuing 1,000 shares of $5 par common stock. At the time of the exchange, the stock was selling for $40 per share. The copyright had a carrying value of $18,000...
-
A soap bubble (n = 1.28) having a wall thickness of 127 nm is floating in air. (a) What is the wavelength of the visible light that is most strongly reflected? Your response differs from the correct...
-
A local politician is concerned that a program for the homeless in her city is discriminating against blacks and other minorities. The following data were taken from a random sample of black and...
-
Indicate which of the following represent independent events. Explain briefly. a) The gender of customers using an ATM machine. b) The last digit of the social security numbers of students in a...
-
The dataset corresponding to the exercise on the DVD holds various measures of the 50 United States. The Murder rate is per 100,000, HS Graduation rate is in %, Income is per capita income in...
-
Youre thinking about getting two dogs and a cat. Assume that annual veterinary expenses are independent and have a Normal model with the means and standard deviations described in Exercise 52. a)...
-
Methanol can be produced by the reaction of carbon dioxide and hydrogen as per the following reaction: The fresh feed available is 500 kmol/hr with 2% inerts and the rest being the reactants in...
-
In an instant coffee plant, 10000 kg/hr of coffee extract containing 20% solids is concentrated using a vacuum evaporator which is designed to produce a concentrated extract with 50% solids suitable...
-
The water gas shift reaction (WGSR) is the reaction of carbon monoxide with steam to produce carbon dioxide and hydrogen and it is used in the production of hydrogen for industrial applications. 600...
Study smarter with the SolutionInn App