Question
The following table provides historical annual returns of two stocks A and B. Years Stock A Stock B 2018 0.4 -0.05 2019 -0.1 0.4 2020
The following table provides historical annual returns of two stocks A and B.
Years | Stock A | Stock B |
---|---|---|
2018 | 0.4 | -0.05 |
2019 | -0.1 | 0.4 |
2020 | 0.35 | -0.10 |
2021 | -0.05 | 0.35 |
An investor would like to create of portfolio consisting of 30% of stock A and 70% of stock B.
1. Calculate the average portfolio return.
The average portfolio return is equal to Answer.
2. Calculate the variance of the portfolio.
The variance is equal to: Answer
Note: In question 2, include 4 decimal points (0.0121, 0.0244...)
3. Calculate the portfolio risk in percentage terms.
The portfolio risk is equal to Answer%.
Note: In question 3, include two decimal points
4. Did the creation of a portfolio reduce the investment risk? Explain why in the reason box.
Yes | No |
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