1.. Jane is considering investing in three different stocks or creating three distinct twostock portfolios. Jane considers herself to be a rather conservative investor. She is able to obtain forecasted returns for the three securities for the years 2015 through 2021.

The data are given in the following table.

In any of the possible two-stock portfolios, the weight of each stock in the portfolio will be 50%. The three possible portfolio combinations are AB, AC, and BC.
To Do Create a spreadsheet similar to Tables 8.6 and 8.7 to answer the following:

a. Calculate the expected return for each individual stock.

b. Calculate the standard deviation for each individual stock.

c. Calculate the expected returns for portfolios AB, AC, and BC.

d. Calculate the standard deviations for portfolios AB, AC, and BC.

e. Would you recommend that Jane invest in the single stock A or the portfolio consisting of stocks A and B? Explain your answer from a risk–return viewpoint.

f. Would you recommend that Jane invest in the single stock B or the portfolio consisting of stocks B and C? Explain your answer from a risk–return viewpoint.

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Year Stock A Stock B Stock C 2015 10% 10% 12% 2016 13 11 14 2017 15 8 10 2018 14 12 11 2019 16 10 2020 14 15 2021 12 15 10 990