Question
Consider the following 6 months of returns for 2 stocks and a portfolio of those 2 stocks: Jan Feb Mar Apr May Jun Stock A
Consider the following 6 months of returns for 2 stocks and a portfolio of those 2 stocks:
| Jan | Feb | Mar | Apr | May | Jun |
| |||||||
| Stock A | 1% | 4% | 7% | 2% | 3% | 3% | |||||||
| Stock B | 1% | 4% | 7% | 2% | 3% | 3% | |||||||
| Portfolio | 0% | 0% | 0% | 0% | 0% | 0% | |||||||
Note: The portfolio is composed of 50% of Stock A and 50% of Stock B.
a. What is the expected return and standard deviation of returns for each of the two stocks?
b. What is the expected return and standard deviation of returns for the portfolio?
c. Is the portfolio more or less risky than the two stocks? Why?
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Financial Markets And Institutions
Authors: Frederic S. Mishkin, Stanley G. Eakins
7th Edition
013213683X, 978-0132136839
