The following table contains monthly returns for Cola Co. and Gas Co. for

2013

Month	Cola Co.	Gas Co.
January	0.0210	0.0280
February	0.0000	0.0050
March	0.0200	0.0180
April	0.0090	0.0280
May	0.0310	0.0840
June	0.0840	0.0460
July	0.1190	0.0820
August	0.0160	0.0460
September	0.0550	0.0300
October	0.0110	0.0140
November	0.0380	0.0290
December	0.0220	0.0740

(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:

VarRp=w21SDR12+w22SDR2+2w1w2CorrR1,R2SDR1SDR2

b.

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

c.

How do your results compare?