You are considering an investment in either individual stocks or a portfolio of stocks. The two...

  

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You are considering an investment in either individual stocks or a portfolio of stocks. The two stocks you are researching, Stock A and Stock B, have the following historical returns: Year FA FB 2017 -23.00% -4.00% 2018 43.00 22.00 2019 20.00 -12.00 2020 -8.00 2021 31.00 48.00 9.00 a. Calculate the average rate of return for each stock during the 5-year period. Do not round intermediate calculations. Round your answers to two decimal places. b. Suppose you had held a portfolio consisting of 50% of Stock A and 50% of Stock B. What would have been the realized rate of return on the portfolio in each year? What would have been the average return on the portfolio during this period? Do not round intermediate calculations. Round your answers to two decimal places. Negative values, if any, should be indicated by a minus sign. Year 2017 2018 2019 2020 2021 Portfolio Average return c. Calculate the standard deviation of returns for each stock and for the portfolio. Do not round intermediate calculations. Round your answers to two decimal places. FB Portfolio Std. Dev. % % d. Suppose you are a risk-averse investor. Assuming Stocks A and B are your only choices, would you prefer to hold Stock A, Stock B, or the portfolio? Why? A risk-averse investor should choose -Select- , since it offers -Select- expected return with -Select- risk. You are considering an investment in either individual stocks or a portfolio of stocks. The two stocks you are researching, Stock A and Stock B, have the following historical returns: Year FA FB 2017 -23.00% -4.00% 2018 43.00 22.00 2019 20.00 -12.00 2020 -8.00 2021 31.00 48.00 9.00 a. Calculate the average rate of return for each stock during the 5-year period. Do not round intermediate calculations. Round your answers to two decimal places. b. Suppose you had held a portfolio consisting of 50% of Stock A and 50% of Stock B. What would have been the realized rate of return on the portfolio in each year? What would have been the average return on the portfolio during this period? Do not round intermediate calculations. Round your answers to two decimal places. Negative values, if any, should be indicated by a minus sign. Year 2017 2018 2019 2020 2021 Portfolio Average return c. Calculate the standard deviation of returns for each stock and for the portfolio. Do not round intermediate calculations. Round your answers to two decimal places. FB Portfolio Std. Dev. % % d. Suppose you are a risk-averse investor. Assuming Stocks A and B are your only choices, would you prefer to hold Stock A, Stock B, or the portfolio? Why? A risk-averse investor should choose -Select- , since it offers -Select- expected return with -Select- risk.

Answer rating: 100% (QA)

Calculations a Average Return Stock A 2300 4300 2200 800 3100 5 1420 Stock B 400 2000 1200 4800 900 ... View the full answer