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Data table (Click on the following icon in order to copy its contents into a spreadsheet.) Using the data in the following table, , consider
Data table (Click on the following icon in order to copy its contents into a spreadsheet.) Using the data in the following table, , consider a portfolio that maintains a 25% weight on stock A and a 75% weight on stock B. a. What is the return each year of this portfolio? b. Based on your results from part (a), compute the average return and volatility of the portfolio. calculation in Eq. 11.9. d. Explain why the portfolio has a lower volatility than the average volatility of the two stocks. a. What is the return each year of this portfolio? Enter the return of this portfolio for each year in the table below: (Round to two decimal places.) FY b. Based on your results from part (a), compute the average return and volatility of the portfolio. The average return of the portfolio is %. (Round to two decimal places.) The volatility of the portfolio is %. (Round to two decimal places.) calculation in Eq. 11.9. The average annual return for stock A is %. (Round to two decimal places.) The average annual return for stock B is %. (Round to two decimal places.) The (weighted) average of the average returns of the two stocks is b. (Round to two decimal places.) The volatility of the portfolio is %. (Round to two decimal places.) d. Explain why the portfolio has a lower volatility than the average volatility of the two stocks. (Select from the drop-down menu.) The portfolio has a volatility than the average volatility of the two stocks because some of the idiosyncratic risk of the stocks in the portfolio is diversified away
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