The following table contains monthly returns for Cola Co. and Gas Co. for 2013 (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 50% invested in Cola Co. stock and 50% invested in Gas Co. stock. Calculate the volatility by: a. Using the formula: ew a 2 Var (R) = w/ SD (R) + w2SD (R)2 + 2w W Corr (R,R) SD (R) SD (R) 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) 2+w SD (R)2 + 2ww Corr (R,R) SD (R) SD (R) The volatility (standard deviation) of the portfolio is %. (Round to two decimal places.) Data table (Click on the following icon in order to copy its contents into a spreadsheet.) Month January February March April May June July August September October November December Cola Co. -0.0210 0.0000 -0.0200 0.0090 -0.0310 -0.0840 -0.1190 -0.0160 0.0550 -0.0110 -0.0380 -0.0220 Gas Co. 0.0280 -0.0050 -0.0180 0.0280 0.0840 -0.0460 0.0820 0.0460 0.0300 0.0140 0.0290 0.0740 Check answer

The following table contains monthly returns for Cola Co. and Gas Co. for 2013fl (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 50% invested in Cola Co. stock and 50% invested in Gas Co. stock. Calculate the volatility by: a. Using the formula: Var(Rp)=w12SD(R1)2+w22SD(R2)2+2w1w2Corr(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(Rp)=w12SD(R1)2+w22SD(R2)2+2w1w2Corr(R1,R2)SD(R1)SD(R2) The volatility (standard deviation) of the portfolio is \%. (Round to two decimal places.) Data table (Click on the following icon D in order to copy its contents into a spreadsheet)