You are considering an investment in either individual stocks or a portfolio of stocks. The two...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
You are considering an investment in either individual stocks or a portfolio of stocks. The two stocks you are researching, Stock A and Stock B, have the following historical returns: Year FA FB 2017 -23.00% -4.00% 2018 43.00 22.00 2019 20.00 -12.00 2020 -8.00 2021 31.00 48.00 9.00 a. Calculate the average rate of return for each stock during the 5-year period. Do not round intermediate calculations. Round your answers to two decimal places. b. Suppose you had held a portfolio consisting of 50% of Stock A and 50% of Stock B. What would have been the realized rate of return on the portfolio in each year? What would have been the average return on the portfolio during this period? Do not round intermediate calculations. Round your answers to two decimal places. Negative values, if any, should be indicated by a minus sign. Year 2017 2018 2019 2020 2021 Portfolio Average return c. Calculate the standard deviation of returns for each stock and for the portfolio. Do not round intermediate calculations. Round your answers to two decimal places. FB Portfolio Std. Dev. % % d. Suppose you are a risk-averse investor. Assuming Stocks A and B are your only choices, would you prefer to hold Stock A, Stock B, or the portfolio? Why? A risk-averse investor should choose -Select- , since it offers -Select- expected return with -Select- risk. You are considering an investment in either individual stocks or a portfolio of stocks. The two stocks you are researching, Stock A and Stock B, have the following historical returns: Year FA FB 2017 -23.00% -4.00% 2018 43.00 22.00 2019 20.00 -12.00 2020 -8.00 2021 31.00 48.00 9.00 a. Calculate the average rate of return for each stock during the 5-year period. Do not round intermediate calculations. Round your answers to two decimal places. b. Suppose you had held a portfolio consisting of 50% of Stock A and 50% of Stock B. What would have been the realized rate of return on the portfolio in each year? What would have been the average return on the portfolio during this period? Do not round intermediate calculations. Round your answers to two decimal places. Negative values, if any, should be indicated by a minus sign. Year 2017 2018 2019 2020 2021 Portfolio Average return c. Calculate the standard deviation of returns for each stock and for the portfolio. Do not round intermediate calculations. Round your answers to two decimal places. FB Portfolio Std. Dev. % % d. Suppose you are a risk-averse investor. Assuming Stocks A and B are your only choices, would you prefer to hold Stock A, Stock B, or the portfolio? Why? A risk-averse investor should choose -Select- , since it offers -Select- expected return with -Select- risk.
Expert Answer:
Answer rating: 100% (QA)
Calculations a Average Return Stock A 2300 4300 2200 800 3100 5 1420 Stock B 400 2000 1200 4800 900 ... View the full answer
Related Book For
Intermediate Financial Management
ISBN: 978-1111530266
11th edition
Authors: Eugene F. Brigham, Phillip R. Daves
Posted Date:
Students also viewed these finance questions
-
Question 6 A civil aviation administration reported that a typical passenger spend ( 18 minutes in line waiting to check - in. The waiting time for a sample of 15 passangers at an airport was...
-
Job Co acquired 90% of the 1 000 000 ordinary shares of Sid Co on 1 October 20X7 The consideration consisted of $5 million in cash and 400 000 equity shares of Job Co each of which had a market value...
-
Historical Realized Rates of Return You are considering an investment in either individual stocks or a portfolio of stocks. The two stocks you are researching, Stock A and Stock B, have the following...
-
Track a futures contract for 5 consecutive days record the prices and write a short summary (150-200 words) describing how and why prices moved the way they did. You will be graded upon correctly...
-
The residual plot in Fig. 79 describes the residuals for using the regression line to describe the association between the percentage of people who voted for President Obama in the 2008 presidential...
-
In a recent annual report, Target reported beginning total assets of $44.1 billion; ending total assets of $44.5 billion; and net sales of $63.4 billion. Compute Targets asset turnover.
-
Prepare an operating budget?
-
Counts Accounting has a beta of 1.15. The tax rate is 40%, and Counts is financed with 20% debt. What is Countss unlevered beta?
-
Required: 1 . If the market interest rate is 8 % , the bonds will issue at $ 5 9 0 , 0 0 0 . Record the bond issue on January 1 , 2 0 2 4 , and the first two semiannual interest payments on June 3 0...
-
Write a PL/SQL block to print the sum of Numbers from 1 to 50.
-
Amanda Carr is a quality management troubleshooter who has been brought in as a consultant by The Werner Corporation (TWC). TWC is applying the principles of quality management in an attempt to...
-
How can a company guard against unauthorized use of terminals in a fastresponse system?
-
Why should working papers be neat?
-
Mark Bolten, CEO of Trans-Tech Corporation, is frustrated. Trans-Tech is the market leader in the manufacture of avionics components for commercial airliners and has been for years. But looking to...
-
What is stratification?
-
Chapter 4 Q3 Financial accounting Tunstall, Incorporated, a small service company, keeps its records without the help of an accountant. After much effort, at outside accountant prepared the following...
-
Michelles trust is subject to 3.8% surtax on the lesser of the trusts net investment income or the excess of the trusts adjusted gross income over the $12,400 threshold (the highest trust tax rate)....
-
Investment with Varying Interest Rate Trena Thompson invested $2,000 in a financial institution on January 1, 2008. She leaves her investment in the institution until December 31, 2012. How much...
-
Comparison of Simple and Compound Interest On June 30, 2008, Rolloff Inc. borrowed $25,000 from its bank, signing a 6% note. Principal and interest are due at the end of two years. Required 1....
-
Develop brief answers to each of the following questions: 1. In what way is selling an investment for a gain potentially a negative in evaluating quality of earnings? 2. Is it unethical for new...
Study smarter with the SolutionInn App