Question

Follow the spreadsheet, which of the stocks is riskier? Which has the higher return?

1991 Bank of America 1142 -118 505 13.7 1992 1993 138 1995 72.7 1996 53.2 321 1997 1998 1999 32.5 28.7 2000 2001 2002 61.2 40.4 13.4 30.4 45.6 18.9 2003 246 2004 25.3 37.9 2005 2006 2007 23.4 20.7 2008 -63.4 2009 2010 2011 2012 -50.1 31.8 23.6 15.2 5.2 84.2 -112 -58.1 34,6 155

Answer 1

Year 9.7 Use excel to calculate Average return and standard deviation Boeing Bank of america 17.96 21.01 Average return Standard deviation 34.44 40.96 Average return for boeing is 17.96% whereas average return for bank of america is 21.01% Boeing Bank of america 1991 114.2 1992 -11.8 50.5 1993 13.7 9 1994 13.8 7.1 1995 72.7 88 1996 39.4 53.2 1997 -6.6 32.1 1998 -32.5 3.6 1999 28.7 -11.7 2000 61.2 1.6 2001 -40.4 45.6 2002 -13.4 18.9 2003 30.4 24.6 2004 24.9 25.3 2005 37.9 3.4 2006 28.4 20.7 2007 -0.1 -20 2008 -50.1 -63.4 2009 31.8 9.9 2010 23.6 - 11.2 2011 15.2 -58.1 2012 5.2 109.6 2013 84.7 34.6 2014 -2.6 15.5 2015 14.1 -4.8 2016 12.2 39.7 2017 29.5 to determine which stock is more riskier, we need to determine return per unit of risk = Average return/ standard deviation Boeing = 17.96/34.44 0.521 Bank of america = 21.01/40.96 0.513 Since boeing return per unit risk is higher, bank of the america stock is riskier Bank of america has higher average return over the period. 94.7