Question
The following table,contains annual returns for the stocks of Home Depot (HD) and Lowe's (LOW). The returns are calculated using end-of-year prices (adjusted for dividends
The following table,contains annual returns for the stocks of Home Depot (HD) and Lowe's (LOW). The returns are calculated using end-of-year prices (adjusted for dividends and stock splits). Use the information for Home Depot (HD) and Lowe's (LOW) to create an Excel spreadsheet that calculates the average returns for portfolios comprised of HD and LOW using the following, respective, weightings: (1.0, 0.0), (0.9, 0.1), (0.8, 0.2), (0.7, 0.3), (0.6, 0.4), (0.5, 0.5), (0.4, 0.6), (0.3, 0.7), (0.2, 0.8), (0.1, 0.9), and (0.0, 1.0). The average annual returns for HD and LOW are 17.45% and 12.92% respectively. Also, calculate the portfolio standard deviation associated with each portfolio composition. The standard deviation for Home Depot and Lowe's and their correlation coefficient are 23.84%, 20.86%, and 0.82913 respectively. (Hint: Review Table 5.2.)
Asking for the Portfolio Average Return and Portfolio Standard Deviation.
Please show work so I can also learn how to do the formulas. Thank you!
Year | HD Returns | LOW Returns | ||
2005 | 4.3% | 16.1% | ||
2006 | 1.0% | 6.1% | ||
2007 | 31.1% | 26.8% | ||
2008 | 11.4% | 3.3% | ||
2009 | 30.5% | 10.6% | ||
2010 | 25.0% | 9.2% | ||
2011 | 23.5% | 3.4% | ||
2012 | 50.3% | 42.9% | ||
2013 | 35.9% | 41.8% | ||
2014 | 30.2% | 41.2% | ||
2015 | 28.6% | 12.1% | ||
2016 | 4.0% | 0.1% | ||
2017 | 44.6% | 26.9% |
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