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a) Suppose Teresa spent $100 buying shares of stock UP and $100 buying shares of stock DOWN on day 1 at the closing price. Suppose
a) Suppose Teresa spent $100 buying shares of stock UP and $100 buying shares of stock DOWN on day 1 at the closing price. Suppose she sold each one at the end of day 6 at the closing price. What is her dollar and percentage return for each stock? b) Calculate daily percentage returns for Stock UP and DOWN. This will be 5 percentages for each stock (return between day 1 and 2 , day 2 and 3 , etc.). c) Using the daily returns from part b), calculate the arithmetic daily average return for Stock UP and Stock DOWN? d) Using the daily returns from part b), calculate the geometric daily average return for Stock UP and Stock DOWN? e) Using the daily returns from part b) and the geometric averages from part d), calculate the standard deviation of daily returns for Stock UP and DOWN f) Using the arithmetic average, what is the Sharpe ratio for Stock UP and DOWN assuming the risk-free rate is 1%
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