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Santi owns stocks A and B in her portfolio. Stock A does not pay dividends, but stock B does, on a regular basis. The
Santi owns stocks A and B in her portfolio. Stock A does not pay dividends, but stock B does, on a regular basis. The following are the prices of stock A and B during the previous five year: Year Stocks Price (Rp) Stock A Price Stock B Price 2017 600 750 2018 730 750 2019 710 750 2020 840 750 2021 940 750 Stock B's dividends during 2018-2021 are as follows, respectively; 60, 80, 100, and 120 (in Rupiah). a. Calculate the arithmetic average return for the period 2018 to 2021. (Hint: Rupiah return to Percentage Return). b. In the future, the probability of recession is 35%, normal is 40%, and boom is 25%. The expected returns under the recession and boom circumstances are 4% lower and 4% higher than the normal condition, respectively. Santi in 2021 invested Rp50 million in Stock A and Rp70 million in Stock B. Calculate the expected return and standard deviation for Stock A and B and the expected return of the portfolio.
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To calculate the arithmetic average return for the period 2018 to 2021 we need to convert the Rupiah returns into percentage returns The formula to ca...Get Instant Access to Expert-Tailored Solutions
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