Suppose the security I and security J have the following historical returns:
Year kI kJ
2001 20% 40%
2002 29 36
2003 -12 -25

1. What is the (arithmetic) average return on security I?
2. What is the standard deviation of the return on security I? (Use n-1 for the denominator.)
3. Suppose you invest 50% of your money in I and the rest in J to form a portfolio P. What is the average return on portfolio P?
4. What is the standard deviation of the return on portfolio P? (Use n-1 for the denominator.)

Solution Preview

Please refer attached file for better clarity of tables. Some of the formulas may be missing here.

Solution:

1. What is the (arithmetic) average return on security I?
Arithmetic average return on security I=(20%+29%-12%)/3=12.33%

2. What is the standard deviation of the return on security I? (Use n-1 for the denominator.)
Mean=arithmetic average ...

Solution Summary

Solution describes the steps to calculate mean and standard deviation of historical returns for given stocks and portfolio.

Calculating Risk Using Beta & Standard Deviation of Return. ... risk - it is used to calculate the expected ... as measured by beta and standard deviation of return ...

... 1. Suppose the expected returns and standard deviations of stocks A and B are E(RA) = 0.17 ... a. Calculate the expected return and standard deviation of a ...

... t CALCULATED: 21. ... The solution examines mean, range, standard deviation, confidence interval calculations. ... 1 Calculate and explain the sample mean. ...

... Process of calculating Variance and Standard Deviation: Variance ... variance and standard deviation are to be calculated. Calculate the mean of this set of data ...

... Step 2: Calculate average monthly return and standard deviation of return. S&P 500. ... Calculates average monthly return and the standard deviation of these ...

... in parts a and b to calculate the coefficient ... Expected return, standard deviation of returns, coefficient of variation ... over the 4-year period are calculated. ...

...Calculates Standard deviation of the winning percentages in a league. ... hypothetical leagues represented below calculate the league ... t; and w is calculated as the ...

... is the deviation and standard deviation is calculated as the ... would be simply be to calculate the square ... by step explanation as to how to calculate the expected ...