Describe how variance and standard deviation are used to measure the variability of individual stocks. Explain...
Describe how variance and standard deviation are used to measure the variability of individual stocks. Explain how an investor chooses the best portfolio of stock to hold.
Homework Answers
An individual should choose portfolio with optimum variance and
standard deviation. For same return the portfolio with minimum
deviation and standard deviation must be chosen. Variance and
standard deviation measures the risk of the portfolio.
An investor chooses the best portfolio by using sharpe ratio (
Extra Return over Risk Free Rate to standard Deviation) should be
highest (in which standard deviation is lowest.
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Describe how variance and standard deviation are used to measure the variability of individual stocks. Explain...
How is the standard deviation of returns for individual common stocks or for a stock portfolio...
How is the standard deviation of returns for individual common stocks or for a stock portfolio calculated?
Which would you use to measure the risk of an individual stock, standard deviation, variance or...
Which would you use to measure the risk of an individual stock, standard deviation, variance or beta?
What is the main difference between the variance and the standard deviation as measures of variability?...
What is the main difference between the variance and the standard deviation as measures of variability? standard deviation is variability around the median, whereas variance is variability around the mean standard deviation is squared variability around the mean, whereas variance is in the original units variance is for the population, whereas standard deviation is around the sample mean. variance is squared variability around the mean, whereas standard deviation is in the original units
Historical Realized Rates of Return You are considering an investment in either individual stocks or a...
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 historical returns: Year 2014 2015 2016 2017 2018 -22.80% 39.25 24.75 -6.75 34.50 -5.50 % 20.30 -10.20 48.10 16.25 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. Stock A:...
2. Answer the following questions: a. Calculate the variability (standard deviation) of the stock returns of...
2. Answer the following questions: a. Calculate the variability (standard deviation) of the stock returns of California REIT and Brown Group during the past 2 years. How variable are they compared with Vanguard Index 500 Trust? Which stock appears to be riskless? b. Suppose Beta's position had been 99% of equity funds invested in the index fund and 1% in the individual stock. Calculate the variability of this portfolio using each stock. How does each stock affect the variability of...
Standard deviation is a measure of:- Select one: a. Risk associate with return of an index...
Standard deviation is a measure of:- Select one: a. Risk associate with return of an index only b. Risk associate with return of a portfolio of stocks only c. All of these d. Risk associate with return of individual stock only
Calculate the expected rate of return, variance and standard deviation of bond and common stock
(a) Calculate the expected rate of return, variance and standard deviation of bond and common stock. (b) Do you think the above stocks and bonds is a good combination to form an investment portfolio? Explain why.(c) Assuming you invest in the portfolio with weights of 70% in stock and 30% in bonds. What are the expected rate of return and standard deviation of the portfolio?
A portfolio is composed of two stocks, A and B. Stock A has a standard deviation...
A portfolio is composed of two stocks, A and B. Stock A has a standard deviation of return of 20%, while stock B has a standard deviation of return of 26%. Stock A comprises 60% of the portfolio, while stock B comprises 40% of the portfolio. If the variance of return on the portfolio is .035, the correlation coefficient between the returns on A and B is _________.
An investor can design a risky portfolio based on two stocks, A and B. The standard...
An investor can design a risky portfolio based on two stocks, A and B. The standard deviation of return on stock A is 20% while the standard deviation on stock B is 5%. The correlation coefficient between the return on A and B is 0%. The standard deviation of return on the minimum variance portfolio is __________. A. 0% B. 4.15% C. 4.85% D. 5.00%
A portfolio is composed of two stocks, A and B. Stock A has a standard deviation...
A portfolio is composed of two stocks, A and B. Stock A has a standard deviation of return of 18%, while stock B has a standard deviation of return of 24%. Stock A comprises 60% of the portfolio, while stock B comprises 40% of the portfolio. If the variance of return on the portfolio is 0.033, the correlation coefficient between the returns on A and B is _________. 0.584 0.140 0.351 0.234
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 historical returns: Year 2014 2015 2016 2017 2018 -22.80% 39.25 24.75 -6.75 34.50 -5.50 % 20.30 -10.20 48.10 16.25 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. Stock A:...
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