Question

Stocks A and B have the following? returns: Stock A Stock B 1 0.10 0.06 2...

Stocks A and B have the following? returns:

Stock A

Stock B

1

0.10

0.06

2

0.07

0.02

3

0.15

0.05

4

?0.05???

0.01

5

0.08

?0.02???

a. What are the expected returns of the two? stocks?

b. What are the standard deviations of the returns of the two? stocks?

c. If their correlation is 0.46?, what is the expected return and standard deviation of a portfolio of 70?% stock A and 30% stock? B?

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Answer #1

Please see the table below. The rows highlighted in yellow contain your answer. Adjacent cells in blue contain the formula in excel I have used to get the final output. All three parts have been worked out sequentially in the attached snapshot.

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