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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

2%

5%

6%

3%

2%

4%

Stock B

1%

2%

9%

0%

5%

1%

Portfolio

1.5%

1.5%

1.5%

1.5%

1.5%

1.5%

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?

Question content area bottom

Part 1

a. What is the expected return and standard deviation of returns for each of the two stocks?

The expected return of Stock A is

enter your response here%.

(Round to one decimal place.)

Part 2

The expected return of Stock B is

enter your response here%.

(Round to one decimal place.)

Part 3

The standard deviation of Stock A is

enter your response here.

(Round to five decimal places.)

Part 4

The standard deviation of Stock B is

enter your response here.

(Round to five decimal places.)

Part 5

b. What is the expected return and standard deviation of returns for the portfolio?

The expected return of a portfolio composed of 50% Stock A and 50% Stock B is

enter your response here%.

(Round to one decimal place.)

Part 6

The standard deviation of a portfolio composed of 50% Stock A and 50% Stock B is

enter your response here.

(Round to five decimal places.)

Part 7

c. Is the portfolio more or less risky than the two stocks? Why?(Select the best choice below.)

A.The portfolio is less risky than the two stocks. It has the same expected return but a standard deviation of 0, compared to standard deviations of

0.04195

for both stocks.

B.The portfolio is more risky than the two stocks. It has the same expected return but a standard deviation of 0, compared to standard deviations of

0.04195

for both stocks.

C.The portfolio is less risky than the two stocks. It has the same expected return but a standard deviation of

0.04195,

compared to standard deviations of 0 for both stocks.

D.The portfolio is less risky than the two stocks. It has the same expected return but a standard deviation of 1, compared to standard deviations of

0.04195

for both stocks.

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