Question: Using the same stock returns file as above, construct a portfolio with 4 0 % of funds invested in stock A , 6 0 %

Using the same "stock returns" file as above, construct a portfolio with 40% of funds invested in stock A,60% invested in stock B, and calculate the following: a. Portfolio expected return rp, and portfolio standard deviation P.(20 points) b. What can you say about A, B, P? A, and B can be computed using the excel function for standard deviation. (10 points) Hint: Use excel formula to compute the average return for each stock, rA and rB, and the correlation between the two stocks, corr(A, B). Then use the formulas for portfolio expected return rp and portfolio standard deviation, P to compute them. Both of these formulas are in your notes. Year, Market Returns( M), Stocks (A), Stocks (B)Year MA B 8/1/20231-4.871929-1.294802-3.459323
9/1/20232-2.1979692.16737.08040810/1/202338.917926-4.70785312.068311/1/202344.4229171.249756-0.55571812/1/202351.5895745.2073295.7272731/1/202465.1720626.39784.0387442/1/202473.1018762.6705721.9008733/1/20248-4.161504-1.023662-7.4616544/1/202494.80212210.800276.6274845/1/2024103.4669763.3205817.8594916/1/2024111.1321351.362559-6.3991937/1/2024122.28346912.52192-0.2897518/1/202413-0.271054.6097913.590384

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!