Question

Year Stock A's Returns Stock B's Returns

2014 -18.0% -14.5%

2015 33.0% 21.8%

2016 15.0% 30.5%

2017 -0.50% -7.6%

2018 27.0% 26.3%

a) Calculate the average rate of return for each stock during the period 2014 through 2018.

b) Assume that someone held a portfolio consisting of 50% of Stock A and 50% of stock B. What would the average return on the portfolio have been each year?

c) What would the average return on the portfolio have been during this period?

d) Calculate the standard deviation of returns for each stock and for the portfolio.

e) Calculate the coefficient of variation for each stock and for the portfolio.

f) Assuming you are a risk-averse investor, would you prefer to hold Stock A, Stock B, or the portfolio? Why?

Answer 1

Ans:- we will use the excel function to find the answer easily.

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