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The table shown below highlights the key information about four companies on the Stock Exchange Bank Company 1 Company 2 Company 3 Share price on

The table shown below highlights the key information about four companies on the Stock Exchange

Bank

Company 1

Company 2

Company 3

Share price on 01 Jan 2019

1250.45

137.7

3103.05

433.55

Share price on 31 Dec 2019

1684.35

125.55

3027.8

432.55

Daily St. Dev.

1.37%

2.03%

1.57%

2.05%

Using the above information, compute the following:

i. Annual return of the four stocks in the year 2019.

ii. Annualized standard deviation of the four stocks in the year 2019 (taking 365 days in the year).

iii. Portfolio return of an equal weighted portfolio of the four stocks.

iv. An investor wishes to invest in only two stock out of the four. The investor is risk averse and wishes to invest only in those two which offer the least risk and make an equal weighted portfolio of these two stocks. What would be the portfolio return of this two-stock portfolio?

v. What would be the portfolio risk (portfolio standard deviation) of the above portfolio as described in point (IV)?

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