The following table summarizes the annual returns you would have made on two companies – Scientific...

The following table summarizes the annual returns you would have made on two companies – Scientific Atlanta, a satellite and date equipment manufacturer and AT&T, the telecom giant from 1988 to 1998.

Year	Scientific Atlanta (%)	AT&T (%)
1989	80.95	58.26
1990	-47.37	-33.79
1991	31	29.88
1992	132.44	30.35
1993	32.02	2.94
1994	25.37	-4.29
1995	-28.57	28.86
1996	0.00	-6.36
1997	11.67	48.64
1998	36.19	23.55

A) Estimate the average and standard deviation in annual returns in each company.
B) Estimate the covariance and correlation in returns between the two companies
C) Estimate the variance of a portfolio composed, in equal parts, of the two investments.

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Expert Solution

SEE THE IMAGE. ANY DOUBTS, FEEL FREE TO ASK. THUMBS UP PLEASE

I HAVE PROVIDED ANSWERS BY MANUAL CALCULATION AS WELL AS USING EXCEL FUNCTIONS. THANK YOU

ROUNDING IS DONE TILL 4 DECIMALS AS NOTHING IS MENTIONED

jeff jeffy answered 1 year ago

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