1) I have given you annual returns for five different stocks. Calculate the mean return and the sample standard devation of returns for each stock. Note that, in reality, you would never estimate future returns using a short time series of past annual returns.

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Some Preliminary Work (20 points) Part One Cost of game 1 1) Suppose you could play a coin-toss game that costs $1 to join. If call heads or tails - if your choice is tossed, then you win $4. If you lose, you have to pay $2 additional. What is the expected return and standard deviation of return from playing this game? Perform your work in the box labeled Part One. Event Probability heads 0.5 tails 0.5 Expected return Standard deviation of return Winnings 4 -1 Retum 300.00% -200.00% 2) Suppose Stock A has an expected return of 18% and a variance of 0.17, while Stock B has an expected return of 11% and a variance of 0.056. The covariance between Stocks A and B is -0.075. What is the expected return and standard deviation of a portfolio with 60% in A and 40% in B? 3) Take a look at the article "It's Never a Stock Pickers Market". The author states that some investment managers will have skill and beat the market. However, the author believes that using active management is still a losing proposition for individual investors. Why? TYPE HERE Part Two Some Preliminary Work (20 points) Part One Cost of game 1 1) Suppose you could play a coin-toss game that costs $1 to join. If call heads or tails - if your choice is tossed, then you win $4. If you lose, you have to pay $2 additional. What is the expected return and standard deviation of return from playing this game? Perform your work in the box labeled Part One. Event Probability heads 0.5 tails 0.5 Expected return Standard deviation of return Winnings 4 -1 Retum 300.00% -200.00% 2) Suppose Stock A has an expected return of 18% and a variance of 0.17, while Stock B has an expected return of 11% and a variance of 0.056. The covariance between Stocks A and B is -0.075. What is the expected return and standard deviation of a portfolio with 60% in A and 40% in B? 3) Take a look at the article "It's Never a Stock Pickers Market". The author states that some investment managers will have skill and beat the market. However, the author believes that using active management is still a losing proposition for individual investors. Why? TYPE HERE Part Two