Please help with part C, D, and E. Thank you!
c. standard deviation = √(sum of (( actual return-mean return)2 /(n-1)))
so here,
Actual return |
Mean return |
s= (Given return - mean)^2 |
||||
year |
A |
B |
A |
B |
A |
B |
2014 |
-21.50 |
-13.40 |
10.95 |
10.95 |
1,053.00 |
592.92 |
2015 |
39.75 |
26.30 |
10.95 |
10.95 |
829.44 |
235.62 |
2016 |
11.25 |
25.80 |
10.95 |
10.95 |
0.09 |
220.52 |
2017 |
-1.00 |
-13.30 |
10.95 |
10.95 |
142.80 |
588.06 |
2018 |
26.25 |
29.35 |
10.95 |
10.95 |
234.09 |
338.56 |
Total |
2,259.43 |
1,975.69 |
So for 2014, for A, S= (-21.50-10.95)^2
And for B, S= (-13.40-10.95)^2
And so on
Now,
Std. dev= (s/(n-1))1/2
For A= (2259.43/4)1/2
= 564.861/2
= 23.77%
For B= (1975.69/4)1/2
= 493.921/2
= 22.22%
Now, for the portfolio:
Portfolio return |
mean return |
s= (Given return - mean)^2 |
|
year |
A |
||
2014 |
-17.45 |
10.95 |
806.56 |
2015 |
33.03 |
10.95 |
487.31 |
2016 |
18.53 |
10.95 |
57.38 |
2017 |
-7.15 |
10.95 |
327.61 |
2018 |
27.80 |
10.95 |
283.92 |
Total |
1,962.78 |
Std. dev= (s/(n-1))1/2
= (1962.78/4)^1/2
= 490.69^1/2
= 22.15%
d. Coefficient of variation:
Coefficient of variation (COV)= standard deviation/ expected return rate or mean
for A:
SD= 23.77
Mean= 10.95
COV= 23.77/10.95
= 2.17
for B:
SD= 22.22
Expected return = 10.95
COV= 22.22/10.95
=2.03
For the portfolio:
SD= 22.15
Mean= 10.95
COV= 22.15/10.95
= 2.02
e. as a risk aversive investor, we will look into the stock that has the minimum deviation from the expected return , that is we will go for the portfolio of 50% A and 50% B.
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