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You have been provided by the following information regarding the return of
stock A and the returns of the market index (S&P500)
Month Stock A returns (S&P500) returns
January 0.04 0.03
February 0.08 0.07
March -0.03 -0.02
April 0.02 0.03
May 0.06 0.04
June -0.07 -0.04
Workout the following requirements. Show your detailed work for all requirements
1. Average monthly rate of return for stock A and the index (S&P500)
2. Standard deviation for stock A and the market index (S&P500)
3. The covariance coefficient between stock A and the market index(S&P500)
4. The correlation coefficient between stock A and the market index(S&P500)
5. As a portfolio consists of stock A and the market index, calculate the portfolio expected
return and the portfolio standard deviation. Consider the weights as 60% for stock A and
40% for the market index.
Answer & Explanation
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