Fill in the missing information in the following table. Assume that Portfolio AB

Question

Fill in the missing information in the following table. Assume that Portfolio AB is 40 percent invested in Stock A. (Negative values should be indicated by a minus sign. Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places. Omit the "%" sign in your response.)

Fill in the missing information in the following table. Assume that Portfolio AB is 40 percent invested in Stock A. (Negative values should be indicated by a minus sign. Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places. Omit the "%" sign in your response.)

Explanation / Answer

average return of Stock A = arithmetic avareage of the returns of the stock for the period 2009 to 2013 i.e (15%+34.6%-16.2%+24.8%+15.4%)/5 = 14.72%

average return of stock B = arithmetic avareage of the returns of the stock for the period 2009 to 2013 i.e (23-34.4+44.4+17.2+27.6)/5 = 15.56%

Portfolio return of AB for a year = weight of A*A's return + weight of B*B's return

A's weight = 40%. So B's weight = 100% - 40% = 60%

Thus portfolio return for 2009 = 40% of 15 + 60% of 23 = 19.80%

Table for returns:

Standard deviation: It is calculated using the following formula: {sum of (return in a year - average return)^2/n-1}^1/2

n = 5 and so n-1 = 4

Thus, the complete table:

Year Stock A Stock B Portfolio AB 2009 15.00% 23.00% 19.80% 2010 34.60% -34.40% -6.80% 2011 -16.20% 44.40% 20.16% 2012 24.80% 17.20% 20.24% 2013 15.40% 27.60% 22.72% Average return 14.72% 15.56% 15.22%

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