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P 12-12 (book/static) :8 Question Help The following table contains monthly returns for Cola Co. and Gas Co. for 2010 B (the returns are shown
P 12-12 (book/static) :8 Question Help The following table contains monthly returns for Cola Co. and Gas Co. for 2010 B (the returns are shown in decimal form, i.e., 0.035 is 3.5%). Using this table and the fact that Cola Co. and Gas Co. have a correlation of 0.6084, calculate the volatility (standard deviation) of a portfolio that is 55% invested in Cola Co. stock and 45% invested in Gas Co. stock. Calculate the volatility by: a. Using the formula: Var( R ) = w; SD (R1) 2+ w SD (R2) + 2W, W2 Corr (R1,R2) SD (R1) SD (R2) b. Calculating the monthly returns of the portfolio and computing its volatility directly. c. How do your results compare? a. Using the formula: Var(Ro) = w SD (R4)2 + w SD (R2) +2W, W2 Corr (R4, R2) SD (R1) SD (R2) The volatility (standard deviation) of the portfolio is %. (Round to two decimal places.) January February March April May June July August September October November December Cola Co. Gas Co. -0.06 0.0236 0.0128 0.066 -0.0186 0.0201 -0.019 0.1836 0.074 -0.0122 -0.0026 0.0225 0.0836 -0.0689 -0.0246 -0.0604 -0.02 0.1361 0.0351 0.0468 0.0054 0.0222
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