Question

Stocks A and B have the following returns: Stock A 0.09 0.06 0.12 -0.02 0.08 Stock B 0.06 0.03 0.05 0.02 -0.03 a. What are the expected returns of the two stocks? b. What are the standard deviations of the returns of the two stocks? c. If their correlation is 0.46, what is the expected return and standard deviation of a portfolio of 65% stock A and 35% stock B? a. What are the expected returns of the two stocks? The expected return for stock Ais (Round to three decimal places.)

5 parts reminaing. please do all years

Answer 1

a. Expected return of A = 0.066 Expected return of B = 0.026
b. Standard deviation of A = 0.047
Standard deviation of B = 0.031
c. Portfolio expected return = 0.052
Portfolio standard deviation= 0.045

Years Stock B (A-A) ² (B-B) ² Slock A (A) (B) 0.09 0.06 0-06 0.03 0.12 ( - 080262 7 (990-0-0) 0-05- -0.02 0.02 0-08 -0.03 EB ΣΑ ECA-132 38-B) A-EA0.066 5--0-02 VA - XAM 16-1868-18) = 4.72% - 3.14% Expected Petuins - 0.0 472 -0.047 = 0.0314 20.031 sland ald Teulations.

C. Ginen WAS 0.65 ; WB = 0.35 portfolio) P (expected Retum on e wax XX + wpx B= 0.65x0.066+0.35%0-026 - 5.24 = 0.052 ro correlation - 0.46 Tp = √ (WATA) (w BoB) 7 2WAWA STATE = f (0.65*0.0472)² + (0.35% 0.0314) ² + 2 (0.65*0.35)*(0.46X0.0472 xo.0314) = 0.045