Question

Linear Combinations

2)

Returns on stocks X and Y are listed below:

Period 1 2 3 4 5 6 7

Stock X 4% 7% -2% 40% 0% 10% -1%

Stock Y 2% -5% 7% 4% 6% 11% -4%

Consider a portfolio of 10% stock X and 90% stock Y.

What is the mean of portfolio returns?

Please specify your answer in decimal terms and round your answer to the nearest thousandth (e.g., enter 12.3 percent as 0.123).

3)

Returns on stocks X and Y are listed below:

Period 1 2 3 4 5 6 7

Stock X 4% 7% -2% 40% 0% 10% -1%

Stock Y 2% -5% 7% 4% 6% 11% -4%

Consider a portfolio of 10% stock X and 90% stock Y.

What is the (population) standard deviation of portfolio returns?

Please specify your answer in decimal terms and round your answer to the nearest thousandth (e.g., enter 12.3 percent as 0.123).

Note that the correct answer will be evaluated based on the full-precision result you would obtain using Excel.

4)

Summary statistics for returns on two stocks X and Y are listed below.

Mean Variance

Stock X 2.83% 0.006000

Stock Y 5.98% 0.003000

The covariance of returns on stocks X and Y is 0.001500. Consider a portfolio of 80% stock X and 20% stock Y.

What is the mean of portfolio returns?

Please specify your answer in decimal terms and round your answer to the nearest thousandth (e.g., enter 12.3 percent as 0.123).

5)

Summary statistics for returns on two stocks X and Y are listed below.

Mean Variance

Stock X 4.86% 0.004000

Stock Y 3.69% 0.003000

The covariance of returns on stocks X and Y is 0.001100. Consider a portfolio of 80% stock X and 20% stock Y.

What is the standard deviation of portfolio returns?

Please specify your answer in decimal terms and round your answer to the nearest thousandth (e.g., enter 12.3 percent as 0.123).

Note that the correct answer will be evaluated based on the full-precision result you would obtain using Excel.

Answer 1

2) Dear student, please post the question one at a time.

Period 1 return = (0.10*0.04) + (0.90*0.02) = 0.0220

Period 2 return = (0.10*-0.07) + (0.90*0.05) = 0.0520

Period 3 return = (0.10*(-0.02)) + (0.90*0.07) = 0.0610

Period 4 return = (0.10*0.4) + (0.90*0.04) = 0.0760

Period 5 return = (0.10*0) + (0.90*0.06) = 0.0540

Period 6 return = (0.10*0.10) + (0.90*0.11) = 0.1090

Period 7 return = (0.10*(-0.01)) + (0.90*(-0.04) = -0.037

the mean of portfolio returns: