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Calculate the average returns and standard deviations

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Question - Below are hypothetical returns for the stocks of two companies.

a. Calculate the average returns and standard deviations for the two stocks

Year Stock A's Return Stock B's Return

1 12% 4%

2 25% 10%

3 15% 5%

4 -12% -6%

5 18% 3%

6 55% 25%

7 10% 8%

8 3% 15%

9 -7% -2%

10 16% 10%

b. Assume you have a portfolio comprised of 70% Stock A and 30% stock B. Given a correlation of the returns between the two stocks of 0.8267, calculate the variance and the standard deviation of the combined portfolio.

Reference no: EM131831680

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