Question: Using the data in the following table, consider a portfolio that maintains a 40% weight on stock A and a 60% weight on stock B.

 Using the data in the following table, consider a portfolio that

Using the data in the following table, consider a portfolio that maintains a 40% weight on stock A and a 60% 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. 11.9. d. Explain why the portfolio has a lower volatility than the average volatility of the two stocks. mo 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.) Year Portfolio 2010 % 2011 % 2012 % 2013 % 2014 % 2015 % Data Table 2u (Click on the following icon in order to copy its contents into a spreadsheet.) Year Stock A Stock B 2010 -4% 17% 2011 16% 15% 2012 8% 17% 2013 -3% -6% 2014 4% - 15% 2015 8% 20% Print Done c. Enter your answer a. TH 7 parts remaining Clear All Check

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!