Question
The holding period rate of retrun (hpr) of stocks A and B for the past five years are: Year Stock A Stock B 2012 25%
The holding period rate of retrun (hpr) of stocks A and B for the past five years are:
Year | Stock A | Stock B |
2012 | 25% | 5% |
2013 | -10% | 6% |
2014 | 40% | 2% |
2015 | -5% | 10% |
2016 | 20% | 3% |
1) base on the information provided above, calculate the expected rate of return and standard deviation for each stock.
2.) calculate coefficient of variation for each stock. if you only want to buy one stock, which onee will you select? why?
3.) determine the correlation coefficient of returns of Stock A and B. Can you reduce risk by creating a protfolio of the combination of both stocks? why or why not?
4.) if you invest 20% of money on stock A and 80% on stock B , calculate expected rate of return and standard deviation of this protfolio. Is the portfolio better than individual stock A and B/ WHy?
Please show work
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