Question

question 8 parts a-e

a

Returns on stocks X and Y are listed below:

Period	1	2	3	4	5	6	7
Stock X	8%	0%	3%	-2%	5%	12%	7%
Stock Y	5%	-2%	4%	7%	1%	12%	-3%

What is the correlation of returns on the two stocks?

Please round your answer to the nearest hundredth.

Note that the correct answer will be evaluated based on the full-precision result you would obtain using Excel.

b

Returns on stocks X and Y are listed below:

Period	1	2	3	4	5	6	7
Stock X	6%	5%	-2%	10%	3%	8%	-4%
Stock Y	11%	7%	10%	-2%	3%	5%	-1%

Consider a portfolio of 70% stock X and 30% stock Y.

What is the mean of portfolio returns?

Please specify your answer in decimal terms and round your answer to the nearest thousandth (e.g., enter 12.3 percent as 0.123).

c

Returns on stocks X and Y are listed below:

Period	1	2	3	4	5	6	7
Stock X	-5%	4%	3%	9%	1%	-3%	4%
Stock Y	12%	7%	-3%	-2%	4%	6%	-1%

Consider a portfolio of 60% stock X and 40% stock Y.

What is the (population) variance of portfolio returns?

Please round your answer to six decimal places.

Note that the correct answer will be evaluated based on the full-precision result you would obtain using Excel.

d

Summary statistics for returns on two stocks X and Y are listed below.

	Mean	Variance
Stock X	2.35%	0.007000
Stock Y	4.53%	0.003000

The covariance of returns on stocks X and Y is 0.002700. Consider a portfolio of 70% stock X and 30% stock Y.

What is the mean of portfolio returns?

Please specify your answer in decimal terms and round your answer to the nearest thousandth (e.g., enter 12.3 percent as 0.123).

e

Summary statistics for returns on two stocks X and Y are listed below.

	Mean	Variance
Stock X	3.41%	0.003000
Stock Y	5.25%	0.004000

The covariance of returns on stocks X and Y is 0.001800. Consider a portfolio of 20% stock X and 80% stock Y.

What is the variance of portfolio returns?

Please round your answer to six decimal places.

Note that the correct answer will be evaluated based on the full-precision result you would obtain using Excel.

Answer 1