Question

In: Finance

The holding Period Rate of Return (HPR) of stocks A and B for the past five...

The holding Period Rate of Return (HPR) of stocks A and B for the past five years are:

     Year Stock A Stock B

      2015 30% 5%               

2016 -15 % 15%

2017 40% 2%

2018 25% 3%

      2019 -5% 10%

  1. Base on the information provided above, calculate the expected rate of return and

standard deviation for each stock.

  1. Calculate coefficient of variation of each stock. If you want to buy only one stock,

which one will you select? Why?

  1. Determine the correlation coefficient between returns of Stocks A and B. Can you reduce risk by creating a portfolio of the combination of both stocks? Why or why not?

  2. If you invest 30% of money on Stock A, and another 70% on Stock B, calculate expected rate of return and standard deviation of this portfolio. Is this portfolio better than individual stock A and B? Why?

Solutions

Expert Solution

Please refer to below spreadsheet for calculation and answer. Cell reference also provided.

Cell reference -

jeff jeffy answered 1 year ago
Next > < Previous

Related Solutions

The holding Period Rate of Return (HPR) of stocks A and B for the past five...
The holding Period Rate of Return (HPR) of stocks A and B for the past five years are: Year Stock A Stock B 2015 30% 5%    2016 -15 % 15% 2017 40% 2% 2018 25%     3% 2019 -5% 10% (1) Base on the information provided above, calculate the expected rate of return and standard deviation for each stock. (2) Calculate coefficient of variation of each stock. If you want to buy only one stock, which one will you...
The holding Period Rate of Return (HPR) of stocks A and B for the past five...
The holding Period Rate of Return (HPR) of stocks A and B for the past five years are: Year Stock A Stock B 2015 30% 5% 2016 -15 % 15% 2017 40% 2% 2018 25% 3% 2019 -5% 10% Base on the information provided above, calculate the expected rate of return and standard deviation for each stock. Calculate coefficient of variation of each stock. If you want to buy only one stock, which one will you select? Why? Determine the...
Below are the holding period returns for the past five years for Microsoft (MSFT) and the...
Below are the holding period returns for the past five years for Microsoft (MSFT) and the S&P 500 Date MSFT S&500 2017 15% 8% 2016 7% 9% 2015 25% 12% 2014 15% 7% 2013 6% 5% a. Calculate the average arithmetic return and standard deviation for MSFT and the S&P500. b. Assuming you are a risk averse investor and expect the next 12 months to be similar to the past twelve months. If you had to make a choice between...
Holding Period Return
If you bought a security at $1,000 and after one year it is sold for $1,250  What is the holding period return of the investment?
Holding period returns can be confused with annual returns. However the only time a hpr should...
Holding period returns can be confused with annual returns. However the only time a hpr should be compared to annual returns is when the holding period is actually one year . In Many cases the holding period can be less than one year or several years. After you make a holding period return calculation you should always convert it to an approximate annual return when making comparisons with other asset . Let’s look at an asset and calculate its holing...
(a) Suppose you hold a bond, and the current one-year holding period rate of return is...
(a) Suppose you hold a bond, and the current one-year holding period rate of return is 6%. And we further know that the yield to maturity for this bond is also 6% now. Could you tell me which rate will be higher if the interest rate decreases? Why? (b) Suppose there are two bonds with the same yield-to-maturity and date to mature; but one is sold at premium, the other one is sold at discount. Could you tell me which...
During the past five years, you owned two stocks that had the following annual rates of return:
Problem 1-05 During the past five years, you owned two stocks that had the following annual rates of return: YearStock TStock B10.190.0620.090.063-0.06-0.074-0.030.0250.140.03a. Compute the arithmetic mean annual rate of return for each stock. Round your answers to one decimal place. Stock T: _______ % Stock B: _______ % Which stock is most desirable by this measure? _______ , is more desirable because the arithmetic mean annual rate of return is _______ . b. Compute the standard deviation of the annual...
Historical rate of return is based on the past and expected rate of return is based...
Historical rate of return is based on the past and expected rate of return is based future probability. Select one a. True b. False
The holding period return on a stock was 25%. Its beginning price was $25 and its...
The holding period return on a stock was 25%. Its beginning price was $25 and its cash dividend was $2.6. Its ending price must have been _________.
What is the holding period return (Capital gain) of a 9% annual coupon bond with a...
What is the holding period return (Capital gain) of a 9% annual coupon bond with a face value of $1000 and with five years to maturity if it is purchased at the beginning of year 1 at a Yield-to-Maturity (market rate) of 6.0% and sold at the beginning of year 2? Assume that rates do not change. 7.4% 7.1% 6.8% 6.0%
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT