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QUESTION 2 This question has 3 parts. Each part is independent. a. Using the following returns, calculate the arithmetic average returns, the variances, and the
QUESTION 2 This question has 3 parts. Each part is independent. a. Using the following returns, calculate the arithmetic average returns, the variances, and the standard deviations for the stock Alpha. (2 marks) Year Returns Stock Alpha 12 % 1 2 23 %6 3 10 % 4 - 13 %6 5 11 % b. Suppose you buy a stock for $225 one year ago. Today it sells for $275, and it also pays you dividend $25 per year. What is the risk premium? Assume that the treasury bill rate 4.8%. (2 marks) c. Suppose your cousin invests in the stock market and doubles her money in a single year while the market, on average, earned a return of only about 15%. Is your cousin's performance a violation of market efficiency (2 marks)
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