You are considering an investment in either individual stocks or a portfolio of stocks. The...
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Accounting
You are considering an investment in either individual stocks or a portfolio of stocks. The two stocks you are researching, Stocks A and B have the following historical returns:
Year
A
B
2011
-19.30%
-16.30%
2012
30.25
22.90
2013
12.00
32.80
2014
-4.50
-5.90
2015
25.75
10.70
a. Calculate the average rate of return for each stock during the 5-year period. Round your answers to two decimal places.
Stock A = _______%
Stock B = _______%
b. Suppose you had held a portfolio consisting of 50% of Stock A and 50% of Stock B. What would have been the realized rate of return on the portfolio in each year? What would have been the average return on the portfolio during this period? Round your answers to two decimal places.
Year
Portfolio
2011
______%
2012
______%
2013
______%
2014
______%
2015
______%
Average return
______%
c. Calculate the standard deviation of returns for each stock and for the portfolio. Round your answers to two decimal places. Enter negative returns with a minus sign.
rA
rB
Portfolio
Std. Dev.
_____%
_____%
_____%
d. Suppose you are a risk-averse investor. Assuming Stocks A and B are your only choices, would you prefer to hold Stock A, Stock B, or the portfolio?
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