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Spreadsheet Exercise: Chapter 8 Jane is considering investing in three different stocks or creating three distinct twostock portfolios. Jane views herself as a rather conservative investor. She is able to obtain historical returns for the three securities for the years 2012 through 2018. The data are given in the following table. Stock C 129 13 Year 2012 2013 2014 2015 2016 2017 2018 Stock A 10% 13% 15% 14% 16% 1496 12 Stock B 10% 11% 8% 12% 10% 15% 15% 10% 1196 9 106 In any of the possible two-stock portfolios, the weight of each stock in the portfolio will be 50%. The three possible portfolio combinations are AR, AC and BC To Do Chapter w P21481217104 t o e SAMSUNG 9% 2017 2018 14% 12% 15% 15% 10% In any of the possible two-stock portfolios, the weight of each stock in the portfolio will be 50%. The three possible portfolio combinations are AB, AC, and BC. 24 To Do Create a spreadsheet similar to Tables 86 and 8.7 to answer the following a. Calculate the average return for each individual stock b. Calculate the standard deviation for each individual stock e. Calculate the average returns for portfolios AB, AC, and BC d. Calculate the standard deviations for portfolios AB, AC, and BC 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. 1. Would you recommend that Jane invest in the single stock B or the portfolio consisting of stocks B and C? Explain You we r k return viewpoint Solution Chapter SAMSUNG e. Would you recommend that Jane invest in the single stock A or the portfolio consisting of s your answer from a risk-return viewpoint. 1. Would you recommend that Jane invest in the single stock B or the portfolio consisting of sto your answer from a risk return viewpoint. Solution a. Calculate the average return for each individual stock. Stock A Stock B Stock C Expected return b. Calculate the standard deviation for each individual stock. Stock A Stock B Stock c Standard deviation Coefficient of variation to the Chapter 3 formali ADADA 248214017101140 . L o e c. Calculate the average returns for portfolios AB, AC, and BC. Port. AB Port. AC Port. BC Year 2012 2013 2014 2015 2016 2017 2018 Expected return Chapter 8 2 . SAMSUNG & 2015 2016 2017 2018 & Expected return & $ 8 d. Calculate the standard deviations for portfolios AB, AC, and BC Port AB Port. AC Port BC Standard deviation Coefficient of variation e. Would you recommend that Jane invest in the single stock A or the portfolio consisting of stocks A and B your answer from a risk return viewpoint. lixplain with a standard deviation of 0.0096 there is both 0.00% Steck A has an expected return of 0.00% Investing in the portfolio has a standard deviation of amount of risk and return in the portfolio We can see that the CV of the portfolio is should be recommended than that of stock alone, so the portfolio of AB SAMSUNG 1 T U W pun LUNSSUING UT SOCKS A and BYE your answer from a risk return viewpoint. with a standard deviation of 0.00% , so there is both a 0.00% Stock A has an expected return of 0.00% Investing in the portfolio has a standard deviation of amount of risk and return in the portfolio. We can see that the CV of the portfolio is should be recommended than that of stock A alone, so the portfolio of AB 1. Would you recommend that Jane invest in the single stock B or the portfolio consisting of stocks B and CP Explain your answer from a risk return viewpoint. Stock B has an expected return of 0.00% with a standard deviation of 0.00% Investing in the portfolio comprised of stocks B and delivers a return of 0.00% and is associated with a standard deviation of 0.00% . 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. Chapter 8 10 . SAMSUNG