Consider Table 3 which presents five years of annual returns for stocks 1 , 2 , and
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Question:
Consider Table which presents five years of annual returns for stocks and the market.
a Calculate the sample expost return and variance for stocks and Calculate the sample
expost covariance and correlation between the returns on stocks and
b Using the single index model, calculate alpha, beta, expected return, systematic, and residual
risk for stocks and
c Use the data calculated in part a of this question. Form a portfolio of stocks and Calculate
the expected return and variance of an equally weighted and minimum variance portfolio of
stocks and
d Graphically illustrate various combinations of portfolio risk and return that can be generated by
investing in stocks and
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