Stocks N and R have the following historical returns: Year Stock N Stock R 2010
ID: 2768951 • Letter: S
Question
Stocks N and R have the following historical returns:
Year
Stock N
Stock R
2010
-18%
-11 %
2011
24%
29 %
2012
12%
44 %
2013
-5%
-7 %
2014
16%
23 %
Calculate the average rate of return for each stock during the 5-year period.
Assume that you are planning to hold a portfolio consisting of 35% of Stock N and 65% of Stock R. What is the realized rate of return on the portfolio in each year?
What is the average return on the portfolio for the 5 year period?
What is the standard deviation of returns for each stock and for the portfolio?
Calculate the coefficient of variation for each stock and for the portfolio?
Year
Stock N
Stock R
2010
-18%
-11 %
2011
24%
29 %
2012
12%
44 %
2013
-5%
-7 %
2014
16%
23 %
Explanation / Answer
realised return Year Stock N Stock R Weights N Weights R W*N W*R D N D R Square DN Square DR 2010 -18% -11% 35% 65% -6.3% -7.2% -23.800% -26.600% 5.66% 7.08% 2011 24% 29% 35% 65% 8.4% 18.9% 18.200% 13.400% 3.31% 1.80% 2012 12% 44% 35% 65% 4.2% 28.6% 6.200% 28.400% 0.38% 8.07% 2013 -5% -7% 35% 65% -1.8% -4.6% -10.800% -22.600% 1.17% 5.11% 2014 16% 23% 35% 65% 5.6% 15.0% 10.200% 7.400% 1.04% 0.55% Average return 5.80% 15.60% Avg return of portfolio 6.1% 11.57% 22.59% Avg return of portfolio= 6.1% SD 34.01% 47.53%
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