# portfolio returns and standard deviation

1. Calculating standard deviation and rates of return

Year 2004 2005 2006 2007 2008

Rate of Return A 70% -50% 50% 40% 20%

Rate of Return B 105% 80% -10% -20% 50%

Calculate the arithmetic return and the standard deviation of returns.

2. Expected return and pricing

Your discount rate is 12%

Dividend at time zero is $1.25

The expected growth rate is 4%.

Using the Gordon Model, find the price of the stock.

3. The CAPM

Calculate the required rate of return on a stock that has a beta of 2, if the risk-free rate is 4% and the market rate of return is 12%.

Calculate the required rate of return on a stock that has a beta of .6, if the risk-free rate is 4% and the market rate of return is 12%.

4. Portfolio Returns

You have $200,000 to invest. You invest 60% in stock A and 40% in stock B.

The returns for your stocks are the same as #8 above.

Year 2004 2005 2006 2007 2008

Rate of Return A 70% -50% 50% 40% 20%

Rate of Return B 105% 80% -10% -20% 50%

Year 2004 2005 2006 2007 2008

Portfolio Returns

Portfolio Std Dev.

Find the portfolio returns and standard deviation for each year.

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https://brainmass.com/economics/risk-analysis/portfolio-returns-and-standard-deviation-267962

#### Solution Summary

The portfolio returns and standard deviation are assessed.