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Problem 5 Intro The following table shows rates of return for two stocks. A B C...

Problem 5

Intro

The following table shows rates of return for two stocks.

A B C
1 Year Stock A Stock B
2 1 14% 13%
3 2 -10% -14%
4 3 -6% -4%
5 4 5% 28%
6 5 14% 8%
7 6 5% 7%

Attempt 1/3 for 10 pts.

Part 1

What is the arithmetic average return for stock B?

Submit

Attempt 1/3 for 10 pts.

Part 2

What is the covariance of returns? (Use =COVARINACE.S function in Excel)

Submit

Homework Answers

Answer #1
Year B
1 14.00%
2 -10.00%
3 -6.00%
4 5.00%
5 14.00%
6 5.00%
Average= 3.67%
Where
Average or Mean = Sum of all observations/Count of all observations
Year B C A = B observation - B average A = C observation - C average A*B
1 14.00% 13.00% 10.33% -1.00% -0.10%
2 -10.00% -14.00% -13.67% -28.00% 3.83%
3 -6.00% -4.00% -9.67% -18.00% 1.74%
4 5.00% 28.00% 1.33% 14.00% 0.19%
5 14.00% 8.00% 10.33% -6.00% -0.62%
6 5.00% 7.00% 1.33% -7.00% -0.09%
Average= 3.67% 6.33% Covariance= Sum of all A*Bs = 4.94%
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