Historical Realized Rates of Return

You are considering an investment in either individual stocks or a portfolio of stocks. The two stocks you are researching, Stock A and Stock B, have the following historical returns:

Year
2015	-18.00	%	-10.00	%
2016	34.00		23.00
2017	21.00		-15.00
2018	-7.00		49.00
2019	29.00		12.00

1. Calculate the average rate of return for each stock during the 5-year period. Do not round intermediate calculations. Round your answers to two decimal places.

   Stock A: %

   Stock B: %

2. Suppose you had held a portfolio consisting of 50% of Stock A and 50% of Stock B. What would have been the realized rate of return on the portfolio in each year? What would have been the average return on the portfolio during this period? Do not round intermediate calculations. Round your answers to two decimal places. Negative values, if any, should be indicated by a minus sign.

   Year	Portfolio
   2015	%
   2016	%
   2017	%
   2018	%
   2019	%
   Average return	%

3. Calculate the standard deviation of returns for each stock and for the portfolio. Do not round intermediate calculations. Round your answers to two decimal places.

   			Portfolio
   Std. Dev.	%	%	%

4. Suppose you are a risk-averse investor. Assuming Stocks A and B are your only choices, would you prefer to hold Stock A, Stock B, or the portfolio? Why?

   A risk-averse investor should choose -Select- (Stock A, Stock B, Portfolio) since it offers -Select- (less, higher, the same) expected return with -Select- (less, higher, the same) risk.