Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

The following table contains monthly returns for Cola Co and Gas Co, for 2010 (the returns are shown in decimal form. te, 0.035 is 35%)

image text in transcribed
The following table contains monthly returns for Cola Co and Gas Co, for 2010 (the returns are shown in decimal form. te, 0.035 is 35%) Using this table and the fact that Cola Co, and Gas Co have a correlation of 0.6084, calculate the volatility (standard deviation) of a portfolio that is 55% invested in Cola Co stock and 45% invested in Gas Co stock. Calculate the volatility by a Using the formula Var (Rs) = w SD (R.) 2 + w} SP (R2) - 2w, w.Com (R, RX) SP (R1) S0(R2) b Calculating the monthly returns of the portfolio and computing its volatility directly c How do your results compare? a. Using the formula Var(R) w;sD(R) - W2 SD (R2) + 2w, wz Corr (R, R,) SD (R,) SD (R2) The volatility standard deviation) of the portfolio is 0% (Round to two decimal places) - X Data table Month January Cola Co 0.1084 0.0236 0.0660 Gas Co -0.0600 00128 February March 0.0186 -0.0190 April 0.0201 May 0.1836 June -0.0122 0.0225 0.0740 0.0026 0.0836 -0.0246 July August September 0.0689 0.0604 October 0.1361 0.0351 -0.0200 0.0000 0.0468 November December 0.0054 0.0222 Print Done Get more help. Clear all Check answer The following table contains monthly returns for Cola Co and Gas Co, for 2010 (the returns are shown in decimal form. te, 0.035 is 35%) Using this table and the fact that Cola Co, and Gas Co have a correlation of 0.6084, calculate the volatility (standard deviation) of a portfolio that is 55% invested in Cola Co stock and 45% invested in Gas Co stock. Calculate the volatility by a Using the formula Var (Rs) = w SD (R.) 2 + w} SP (R2) - 2w, w.Com (R, RX) SP (R1) S0(R2) b Calculating the monthly returns of the portfolio and computing its volatility directly c How do your results compare? a. Using the formula Var(R) w;sD(R) - W2 SD (R2) + 2w, wz Corr (R, R,) SD (R,) SD (R2) The volatility standard deviation) of the portfolio is 0% (Round to two decimal places) - X Data table Month January Cola Co 0.1084 0.0236 0.0660 Gas Co -0.0600 00128 February March 0.0186 -0.0190 April 0.0201 May 0.1836 June -0.0122 0.0225 0.0740 0.0026 0.0836 -0.0246 July August September 0.0689 0.0604 October 0.1361 0.0351 -0.0200 0.0000 0.0468 November December 0.0054 0.0222 Print Done Get more help. Clear all Check

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Marketing For Financial Advisors

Authors: Eric Bradlow, Keith Niedermeier, Patti Williams

1st Edition

0071605142, 978-0071605144

More Books

Students also viewed these Finance questions