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Measured by the standard deviation of returns

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Reference no: EM131015811

Question:The homework must be done with MS Excel (IF YOU PREFER TO WRITE IN A WORD FILE, YOU MUST ATTACH YOUR EXCEL WORKSHEET) 

2. You need to write down all necessary steps/formulas leading to your results. Providing me with only the final answer will not receive any credit
3. Assignment must be submitted in MS Excel format. Do not paste in TXT format in the area below the Title.

Assignment Five

1. 

                    Year               ECB                WCB 

                2004             40.00%            40.00%

                2005            -10.00%            15.00%

                2006             35.00%            -5.00%

                2007             -5.00%           -10.00%

                2008             15.00%            35.00%

a. What is the expected return and risk of each stock?

b. Measured by the standard deviation of returns, by how much would your uncle's risk have been reduced if he had held a portfolio consisting of 60% in ECB and the remainder in WCB?  In other words, what is the difference between portfolio's standard deviation and weighted average of components' standard deviations? (Hint: check the example on page 11-12 on my note).

2.

            Economic

            Conditions        Prob.             Return

            Strong            30%                 32.0%

            Normal            40%                10.0%

            Weak              30%               -16.0%

4.

            Stock              Investment           Beta

              A                 $150,000              1.40

              B                  50,000                0.80

              C                 100,000               1.00

              D                   75,000              1.20

What is the portfolio's beta?

Reference no: EM131015811

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