Question
Here are the returns on two stocks. Digital Cheese Executive Fruit January +18 +8 February 4 +1 March +6 +5 April +8 +16 May 5
Here are the returns on two stocks.
| Digital Cheese | Executive Fruit | |
|---|---|---|
| January | +18 | +8 |
| February | −4 | +1 |
| March | +6 | +5 |
| April | +8 | +16 |
| May | −5 | +2 |
| June | +4 | +6 |
| July | −3 | −4 |
| August | −9 | −3 |
Required:
a-1. Calculate the variance and standard deviation of each stock.
a-2. Which stock is riskier if held on its own?
b. Now calculate the returns in each month of a portfolio that invests an equal amount each month in the two stocks.
c. Is the variance more or less than halfway between the variance of the two individual stocks?
Step by Step Solution
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Step: 1
Lets start by calculating the required values step by step a1 Calculate the variance and standard deviation of each stock To calculate the variance an...
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Income Tax Fundamentals 2013
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill
31st Edition
1111972516, 978-1285586618, 1285586611, 978-1285613109, 978-1111972516
