Using the data in the following table, $,$ consider a portfolio that maintains a $45\%$ weight on stock A and a $55\%$ weight on stock B$.$

a$.$ What is the return each year of this portfolio?

b$.$ Based on your results from part $($a$),$ compute the average return and volatility of the portfolio.

c$.$ Show that $($i$)$ the average return of the portfolio is equal to the $($weighted$)$ average of the average returns of the two stocks, and $($ii$)$ the volatility of the portfolio equals the same result as from the

calculation in Eq$.11\mathrm{.}9.$

d$.$ Explain why the portfolio has a lower volatility than the average volatility of the two stocks.

a$.$ What is the return each year of this portfolio?

Enter the return of this portfolio for each year in the table below: $($Round to two decimal places.$)$

b$.$ Based on your results from part $($a$),$ compute the average return and volatility of the portfolio.

The average return of the portfolio is $7\mathrm{.}38\%.($Round to two decimal places.$)$

The volatility of the portfolio is

$($Round to two decimal places.$)$

c$.$ Show that $($i$)$ the average return of the portfolio is equal to the $($weighted$)$ average of the average returns of the two stocks, and $($ii$)$ the volatility of the portfolio equals the same result as from the

calculation in Eq$.11\mathrm{.}9.$

The average annual return for stock $A$ is

$\%.($Round to two decimal places.$)$

The average annual return for stock B is $12\mathrm{.}33\%.($Round to two decimal places.$)$

The $($weighted$)$ average of the average returns of the two stocks is $7\mathrm{.}38\%.($Round to two decimal places.$)$

The volatility of the portfolio is

$\%.($Round to two decimal places.$)$Data table