Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Big Lous Financial Advisors has suggested you diversify by purchasing four stocks in equal percentages because they believe this will provide better diversification. Use the

Big Lous Financial Advisors has suggested you diversify by purchasing four stocks in equal percentages because they believe this will provide better diversification. Use the table of historical returns listed below to calculate the expected return and standard deviation of the portfolio.

Returns (%)
Year Stock A Stock B Stock C Stock D
1 14.10 18.34 9.19 8.27
2 14.86 18.66 6.91 11.46
3 9.90 13.52 8.02 4.02
4 12.17 13.51 10.09 8.60
5 10.07 13.30 7.96 4.64

a. What is the standard deviation for each stock in the portfolio? (Enter your answer as a percent rounded to two decimal places.)

Stock A %

Stock B %

Stock C %

Stock D %

b. What is the expected return for the portfolio? (Enter your answer as a percent rounded to two decimal places.)

Portfolio expect return %

c. What is the standard deviation of the portfolio? (Enter your answer as a percent rounded to two decimal places.

portfolio standard deviation %

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access with AI-Powered Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Students also viewed these Finance questions