Securities A & B have the following rates of return & probabilities of occurrence:
Probability ROR on Securities: A B
0.3 -2% 28%
0.3 4% 12%
0.4 20% 3%
a. calculate mean & standard deviation in the return for each asset.
b. calculate the covariance & the correlation coefficient on the returns of the two assets
c. calculate the mean & standard deviation in the return on the following portfolios of the two assets:
(1) 75% in A and 25% in B
(2) 50% in each
(3) 25% in A & 75% in B
ROR: Rate of Return© BrainMass Inc. brainmass.com October 16, 2018, 7:51 pm ad1c9bdddf
Calculates mean, standard deviation, covariance, correlation coefficient, for returns on securities and mean & standard deviation of return for portfolios.
Calculating the Return, Variance and Standard Deviation
Given the large-cap stock index and the government bond index data in the following table, calculate the expected mean return and standard deviation of return for a portfolio 75 percent invested in the stock index and 25 percent invested in the bond index
Assumed Returns, Variances, and Correlations
Large-Cap Stock Index Government Bond Index
Expected return 15% 5%
Variance 225 100
Standard Deviation 15% 10%
A. Mean and geometric mean of the rate of return
B. Variance and standard deviation of the rate of return
C. Covariance and correlation coefficient of the rate of return.