Stocks A and B have the following historical returns: Year............. Stock A's Returns, rA........... Stock B's Returns,

Question:

A and B have the following historical returns:
Year............. Stock A's Returns, rA........... Stock B's Returns, rB
2010........................... (18.00%)........................ (14.50%)
2011............................... 33.00............................ 21.80
2012............................... 15.00............................. 30.50
2013............................... (0.50)............................ (7.60)
2014............................... 27.00............................. 26.30
a. Calculate the average rate of return for each stock during the period 2010 through 2014.
b. Assume that someone held a consisting of 50% of Stock A and 50% of Stock B.
What would the realized rate of return on the have been each year? What would the average return on the have been during this period?
c. Calculate the standard deviation of returns for each stock and for the Calculate the coefficient of variation for each stock and for the Assuming you are a risk-averse investor, would you prefer to hold Stock A, Stock B, or the Why?
Stocks
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