The following table contains monthly returns for Cola Co. and Gas Co. for 2010 LOADING...(the returns are shown in decimal form, i.e., 0.035 is 3.5%). Using this table and the fact that Cola Co. and Gas Co. have a correlation of0.0969, calculate the volatility (standard deviation) of a portfolio that is 60% invested in Cola Co. stock and 40% invested in Gas Co. stock. Calculate the volatility by:

a. Using the formula:VarRp=w21SDR12+w22SDR2+2w1w2CorrR1,R2SDR1SDR2

b.Calculating the monthly returns of the portfolio and computing its volatility directly.

c.How do your results compare?

Month Cola Co. Gas Co. -0.0210 0.0280 January February March 0.0000 -0.0200 April 0.0090 -0.0310 -0.0050 -0.0180 0.0280 0.0840 -0.0460 0.0820 May June -0.0840 -0.1190 -0.0160 0.0460 0.0550 0.0300 July August September October November December -0.0110 0.0140 0.0290 -0.0380 -0.0220 0.0740 The following table contains monthly returns for Cola Co. and Gas Co. for 2010 (the returns are shown in decimal form, i.e., 0.035 is 3.5%). Using this table and the fact that Cola Co. and Gas Co. have a correlation of - 0.0969, calculate the volatility (standard deviation) of a portfolio that is 60% invested in Cola Co. stock and 40% invested in Gas Co. stock. Calculate the volatility by: a. Using the formula: Var (Rp) = wSD(R4)2 + wsD (R2) +2wqw2 Corr (R1,R2) SD (R1) SD (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(Ro) w} SD(R1) 2 + wSD (R2) +2w, w2Corr (R1,R2) SD (RA) SD (R2) The volatility (standard deviation) of the portfolio is %. (Round to two decimal places.)