e. Would you recommend that Jane invest in the single stock A or the portfolio consisting of stocks A and B? Explain your answer from a risk-return viewpoint. 56 7 8 9 0 1 Stock A has an expected return of 13.43% with a standard deviation of 1.99% Investing in the portfolio has a standard deviation of 1.47% so there is both a amount of risk and return in the portfolio. We can see that the CV of the portfolio is than that of stock A alone, so the portfolio of AB should be recommended Would you recommend that Jane invest in the single stock B or the portfolio consisting of stocks B and C? Explain your answer from a risk-return viewpoint. . Stock B has an expected return of 11.57% with a standald deviation of 2.64% Investing in the portfolio comprised of stocks B and C delivers a return of 11.14% and is associated with a standard deviation of 1.41% So both the return and risk of the portfolio are Considering the CV, however, Jane, can determine that is preferable to because the CV is lower 10 In cell J59, type either higher or lower depending on your previous answers for stock A and portfolio AB 11 In cell F61, type either more or less depending on your previous answers for stock A and portfolio AB 12 In cell C69. type either higher or lower depending on your previous answers for stock B and portfolio BC. 13 In cell H69, type either stock B or portfolio BC depending on your previous answers for stock B and portfolio BC. 14 In cell C70, type either stock B or portfolio BC depending on your previous answers for stock B and portfolio BC. Stock A 13.43% Stock B 11.57% Expected retum Stock C 10.71% b. Calculate the standard deviation for each individual stock. Standard deviation Coefficient of variation Stock A 1.99% 0.15 Stock B 2.64% 0.23 Stock C 1.80% 0.17 c. Calculate the average retums for portfolios AB, AC, and BC. Year 2012 2013 2014 2015 2016 2017 2018 Port. AB 10.00% 12.00% 11.50% 13.00% 13.00% 14.50% 13.50% 12.50% Port. AC 11.00% 13.50% 12.50% 12.50% 12.50% 11.50% 11.00% 12.07% Port. BC 11.00% 12.50% 9.00% 11.50% 9.50% 12.00% 12.50% 11.14% Expected return d. Calculate the standard deviations for portfolios AB, AC, and BC. Standard deviation Coefficient of variation Port. AB 1.47% 0.12 Port AC 0.9396 0.08 Port BC 1.41% 0.13 e. Would you recommend that Jane invest in the single stock A or the portfolio consisting of stocks A and B? Explain your answer from a risk-retum viewpoint. a Stock A has an expected retum of 13.43% with a standard deviation of 1.99% Investing in the portfolio has a standard deviation of 1.47% so there is both a amount of risk and retum in the portfolio. We can see that the CV of the portfolio is than that of stock A alone, so the portfolio of AB should be recommended. f Would you recommend that Jane invest in the single stock B or the portfolio consisting of stocks B and C? Explain your answer from a risk-retum viewpoint. Stock B has an expected retum of 11.57% with a standard deviation of 2.64% Investing in the portfolio comprised of stocks B and C delivers a retum of 11.14% and is associated with a standard deviation of 1.41% So both the retum and risk of the portfolio are Considering the CV, however, Jane, can determine that is preferable to because the CV is lower
