Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Date Cola Co. Gas Co. Jan 0.20% 0.30% Feb 7.20% 3.90% Mar 6.26% 3.70% Apr 7.10% 4.90% May 1.60% 5.70% June 4.90% 4.60% July 3.00%
Date | Cola Co. | Gas Co. | |
Jan | 0.20% | 0.30% | |
Feb | 7.20% | 3.90% | |
Mar | 6.26% | 3.70% | |
Apr | 7.10% | 4.90% | |
May | 1.60% | 5.70% | |
June | 4.90% | 4.60% | |
July | 3.00% | 0.70% | |
Aug | 2.70% | 6.40% | |
Sep | 0.00% | 0.90% | |
Oct | 10.50% | 10.20% | |
Nov | 4.90% | 6.70% | |
Dec | 4.20% | 1.50% |
The volatility (standard deviation) of the portfolio is %
The following table contains monthly returns for Cola Co. and Gas Co. for 2022: Using this table and the facts that Cola Co. has a standard deviation of return of 5.48%, Gas Co. has a standard deviation of return of 5.00%, and they have a correlation of 0.2749 , calculate the volatility (standard deviation) of a portfolio that is 75% invested in Cola Co. stock and 25% invested in Gas Co. stock. a. Calculate the volatility using the formula: Var(Rp)=wCola2SD(RCola)2+wGas2SD(RGas)+2wColawGasCorr(RCola,RGas)SD(RCola)SD(RGas) b. Calculating the monthly returns of the portfolio and computing its volatility directly. c. How do your results compareStep by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started