Question
Luther Corporation has invested in a portfolio of stocks. The return on this portfolio for the last five years is tabled below. Also, the return
Luther Corporation has invested in a portfolio of stocks. The return on this portfolio for the last five years is tabled below. Also, the return on Treasury bills in each of the years is provided.
Year | Portfolio Return | Treasury Bill Return |
1 | 17.50% | 2.50% |
2 | 8.50% | 1.50% |
3 | -7.00% | 0.50% |
4 | 12.00% | 1.50% |
5 | 19.25% | 2.00% |
Use this information to answer the following questions:
(a) What is the geometric mean return of the portfolio for these five years?
(b) What is the arithmetic mean of the risk premium on the portfolio for these five years?
(c) What is the variance and standard deviation of the return on the portfolio for these five years?
(c) What is the variance and standard deviation of the return on the portfolio for these five years?
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