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Stocks A and B have the following historical returns: Year TA TB 2006 2007 2008 -18.00% 33.00 15.00 -0.50 27.00 - 14.50% 21.80 30.50 -7.60
Stocks A and B have the following historical returns: Year TA TB 2006 2007 2008 -18.00% 33.00 15.00 -0.50 27.00 - 14.50% 21.80 30.50 -7.60 26.30 2009 2010 a. Calculate the average rate of return for each stock during the 5-year period. b. Assume that someone held a portfolio consisting of 50% of Stock A and 50% of Stock B. What would have been the realized rate of return on the portfolio in each year? 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 then, assuming these are your only choices, would you prefer to hold Stock A, Stock B, or the portfolio? Why
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