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Stock A and Stock B produced the following returns during the past five years (Year -1 is one year ago, Year -2 is two
Stock A and Stock B produced the following returns during the past five years (Year -1 is one year ago, Year -2 is two years ago, and so forth): Year Stock A's Returns, RA Stock B's Returns, R -1 -18.00% -14.50% 33.00 21.80 15.00 30.50 -0.50 -7.60 S 27.00 26.30 a. Calculate the average rate of return for each stock during the past five years. b. Assume that someone held a portfolio consisting of 50 percent Stock A and 50 percent Stock B. What would have been the realized rate of return on the portfolio in each year for the past five years? What would have been the average return on the portfolio during this period? c. Calculate the standard deviation of returns for each stock and for the portfolio. d. Calculate the coefficient of variation for each stock and for the portfolio. e. If you are a risk-averse investor, would you prefer to hold Stock A, Stock B, or the portfolio? Why?
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