Company A | Period | ReturnA | Ai-mean(A) | ReturnB | Bi-Mean(B) | (Ai-mean(A))*(Bi-Mean(B)) |
1 | 15% | 3% | 18% | 4% | 0.14% | |
2 | 25% | 13% | 24% | 10% | 1.38% | |
3 | -5% | -17% | -1% | -15% | 2.44% | |
Average | (R1+R2+R3)/3 | 12% | 14% | 3.97% | ||
Standard Deviation | Average/(n-1) | 0.152752523 | 0.130511813 | |||
Sharpe ratio | return per unit of risk | 0.763762616 | 1.047159361 | |||
Covariance | ((Ai-mean(A))*(Bi-Mean(B)))/(n-1) | 0.019833333 | ||||
Correlation | covariance/SDevA*SDevB | 0.994849751 | ||||
Geometric Average | ((1+r1)*(1+r2)*(1+r3))^1/n - 1 | 0.131478473 |
Wa | Ra | Wb | Rb | SDevA | SDevB | |
0.5 | 12% | 0.5 | 14% | 0.152753 | 0.130511813 | |
Expected portfolio return | Wa*Ra+Wb*Rb | 0.126666667 | ||||
Standard deviation | ((Wa*Sdeva)^2 +(Wb*Sdevb)^2+2*corr*Wa*Sdeva*Wb*Sdevb)^(0.5) | 0.141450816 | ||||
Wighted standard deviation | Wa*SDeva+Wb*Sdevb | 0.141632168 | ||||
Correlation coeff = -1 | 0.011120355 |
Qns 1 | 12% | |
Qns 2 | 0.130511813 | |
Qns 3 | Company B | |
Qns 4 | 0.019833333 | |
Qns 5 | 0.994849751 | |
Qns 6 | 0.126666667 | |
Qns7 | 0.141632168 | |
Qns 8 | 0.141450816 | |
Qns 9 | 0.011120355 | When Coeff = -1 |
Qns 10 | 0.131478473 |
were you c which of the geometric average. The Actual Returns of Company A for the...
(a) Calculate the expected returns using the Arithmetic Average and the Geometric Average respectively. (b) Which approach is a better way to measure the performance of portfolio? Why? 2. Suppose you are required to calculate a portfolio return using data for 2012 and 2013. Ob- servations are presented as follows. Period Return 2012 0.50 2013 - 0.50 Table 1: Statistics from the history of portfolio returns, 2012-2013
Suppose the expected returns and standards deviations of two stocks were stock A: E (R) =9%, STANDARD DEVIATION = 36% STOCK B: E (R) = 15%, STANDARD DEVIATION = 62% A. calculate the expected return of a portfolio that is composed of 35% of stock A and 65% of stock B. b. calculate the standard deviation of this portfolio when the correlation coefficient between the returns is 0.5 c. calculate the standard deviation of this portfolio (same weights in each...
Calculate the arithmetic mean, the geometric mean, sample standard deviation, and correlation coefficient of the Bonds and Small Cap Stocks. To really test your skills, calculate the expected return and risk of a 30% Bond & 70% Small Cap Stock portfolio. Estimate the weights of each asset class where you think the Minimum Variance portfolio (MPV) be located on the risk & return graph.
QUESTION 2: The returns on shares A and B in four equally likely states at the end of next year are summarized below. 30 State Probability Rates of Rates of Return of Return of Share A Share B 0.3 -25 10.4 50 25 0.2 5 -40 0.1 40 30 a. Calculate the expected return, variance and standard deviation for each share. b. Compute the coefficient of correlation for the returns to these shares. c. Calculate the expected return, variance and...
Considering the world economic outlook for the coming year and estimates of sales and earnings, we expect the rate of return for the stocks ABC and SGF with the following probabilities: Probability 0.35 0.4 SGF 10% ABC 36% 14% 0% 8% 0.25 4% 1. For each stock, calculate the expected return and the standard deviation: 2. Calculate the covariance and the correlation coefficient between the rates of return; 3. If you invest 80% in ABC and 20 % in SGF,...
Expected Returns 0.17 0.11 0.30 Standard Deviation 0.12 0.05 Firm A's common stock Firm B's common stock Correlation coefficient (Computing the standard deviation for a portfolio of two risky investments) Mary Guilott recently graduated from college and is evaluating an investment in two companies' common stock. She has collected the following information abou the common stock of Firm A and Firm B: a. If Mary decides to invest 10 percent of her money in Firm A's common stock and 90...
8. Which of the following most likely has the largest standard deviation of returns? a. Treasury bills b. US large stocks c. Corporate bonds 9. The standard deviation of portfolio returns is most likely a. less than the weighted average standard deviation of returns of its assets. b. equal to the weighted average standard deviation of returns of its assets. c. greater than the weighted average standard deviation of returns of its assets. 10. The correlation between a risk-free asset...
Consider the following five monthly returns: 4% -2%. 3%. 8%. -1% a. Calculate the geometric average monthly return over this period. b Calculate the arithmetic average monthly return over this period and express your answer as a percentage per month. c. Calculate the monthly variance over this period. d. Calculate the monthly standard deviation over this period.
1. You are working in a financial intermediary and your manager asks you to analyze stocks of two different companies trading on Borsa İstanbul. The first company is called R&H Inc. (RHI) and the second company is called M&L Corp. (MLC). Both of these companies are in consumer's goods industry and founded at the beginning of the 20th century. You do not know what the returns on these company stocks will be for the next year but you have some...
Question 3 (total of 20 marks): An investor holds a portfolio comprising three assets (or stocks) A, B and C. Refer to the below tables to answer the questions that follow. Assume that returns are effective annual rates: Variables Stock A Stock B Stock C 33% 40% 25% Stock return standard deviation 0.25 $ 55,000.00 0.33 35,000.00 0.22 10,000.00 Investment $ $ Assume the following information holds: Correlation coefficient of the returns between A & B 0.10 Correlation coefficient of...