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Time Period 1 Stock A 8% 11% 14% 12% 16% 2 3 4 5 Rate of return Stock B 17% 12% -8% 0% -2% Market

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Time Period 1 Stock A 8% 11% 14% 12% 16% 2 3 4 5 Rate of return Stock B 17% 12% -8% 0% -2% Market 10% 9% 8% 9% 12% a. What is the average return, standard deviation of each item? b. What is the covariance of A and B with the market? What are their betas? c. You are 60% invested in A and 40% invested in B, what would be the expected return of this combination if the market is expected to return 9.5% and the risk-free rate is 2%? d. Why would you include all these in your portfolio? Explain intuitively by looking at the data relationships

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