Explore BrainMass

Explore BrainMass

    Average return, standard deviation and coefficient of variation

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    Stocks A and B have the following historical returns:

    Year rA rB
    2006 -22.40% -13.30%
    2007 20.50 19.70
    2008 19.25 22.10
    2009 -3.00 -10.90
    2010 22.75 28.20

    a.Calculate the average rate of return for each stock during the 5-year period. Round your answers to two decimal places.

    b.Assume that someone 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.

    c.Calculate the standard deviation of returns for each stock and for the portfolio. Round your answers to two decimal places.

    d.Calculate the coefficient of variation for each stock and for the portfolio. Round your answers to two decimal places.

    © BrainMass Inc. brainmass.com December 15, 2020, 8:36 pm ad1c9bdddf
    https://brainmass.com/math/fractions-and-percentages/average-return-standard-deviation-coefficient-of-variation-457391

    Solution Preview

    Please refer attached file for formulas and better clarity of tables.

    Year Stock A Stock B
    ra rb
    2006 -22.40% -13.30%
    2007 20.50% 19.70%
    2008 19.25% 22.10%
    2009 -3.00% -10.90%
    2010 22.75% 28.20%
    Sum 37.10% 45.80%

    a.Calculate the average rate of return for each stock during the 5-year period. Round your answers to two decimal places.
    Average Return for Stock A=7.42%

    Average Return for Stock B=9.16%

    b.Assume that someone 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 ...

    Solution Summary

    This solution describes the steps to calculate average return, standard deviation and coefficient of variation in the given case.

    $2.19

    ADVERTISEMENT