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Stock A and B have the following dividend and price data for the last five years: Stock A Stock A Stock B Stock B Year
Stock A and B have the following dividend and price data for the last five years:
Stock A | Stock A | Stock B | Stock B | |
Year | Dividend | Year-end price | Dividend | Year-end price |
0 | -- | $77.5 | -- | $24.5 |
1 | $6.8 | $71.0 | $2.0 | $19.5 |
2 | $7.3 | $77.5 | $2.1 | $22.0 |
3 | $7.8 | $90.0 | $2.3 | $27.5 |
4 | $8.1 | $77.0 | $2.6 | $26.5 |
5 | $8.5 | $75.0 | $3.0 | $31.0 |
a) Calculate the realized rate of return (or holding period return) for each stock each year.
b) Calculate the (sample) mean and the standard deviation of returns of each stock, and the correlation of returns of the two stocks.
c) Consider an equally weighted portfolio P of the two stocks (A and B). What will be the expected return and the variance of the portfolio P.
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