Question

Campbell's father holds just one stock, East Coast Bank (ECB), which he thinks is a very low-risk security. Campbell agrees that the stock is relatively safe, but he wants to demonstrate that his father's risk would be even lower if he were more diversified. Campbell obtained the following returns data shown for West Coast Bank (WCB). Both have had less variability than most other stocks over the past 5 years. Measured by the standard deviation of returns, by how much would his father's historical risk have been reduced if he had held a portfolio consisting of 50% ECB and the remainder in WCB? Enter your answer rounded to two decimal places. Do not enter % in the answer box. For example, if your answer is 0.12345 or 12.345% then enter as 12.35 in the answer box.
	Year	ECB	WCB
	2014	20.00%	25.00%
	2015	-10.00%	15.00%
	2016	35.00%	-5.00%
	2017	-5.00%	-10.00%
	2018	15.00%	35.00%

Answer 1

aVERAGE RETURN=ECB AVERAGE(C2:C6)--WCB AVERAGE=AVERAGE(D2:D6)

STANDARD DEVIATION=ECBSTDEV.P(C2:C6)=WCBSTDDEV.P(D2;D6)

RISK PORTFOLIO=ECBSTDEV.P*50%+WCBSTD.DEV.P*50%

THE RISK PORTFOLIO WILL BE MORE HIS FATHERS RISK INVESTMENT WOULD BE 0.32% MORE