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

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
2014	-18.10	%	-9.90	%
2015	41.50		20.40
2016	28.50		-17.20
2017	-2.00		54.10
2018	22.75		25.25

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.

Stock A: %

Stock 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 Portfolio

2014   %

2015   %

2016   %

2017   %

2018   %

Average return   %
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.

Portfolio

Std. Dev. % % %
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-Stock AStock BPortfolioItem 12 , since it offers -Select-lesshigherthe sameItem 13 expected return with -Select-lesshigherthe sameItem 14 risk.

Expert Solution

jeff jeffy answered 2 hours ago

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