Calculate the variability of the stock returns

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Reference no: EM131980640

a. Calculate the variability (standard deviation) of the stock returns of California REIT and Brown Group during the past 2 years. How variable are they compared with Vanguard Index 500 Trust? Which stock appears to be riskless? b. Suppose Beta's position had been 99% of equity funds invested in the index fund and 1% in the individual stock. Calculate the variability of this portfolio using each stock. How does each stock affect the variability of the equity investment, and which stock is riskless? Explain how this makes sense in view of your answer to Question #1 above. c. Compute the "beta" for each stock using the Index returns as the Market returns. How does this relate to the situation described in Question #2 above? d. How might the expected return for each stock relate to its riskiness? e. How much will Sarah require / expect to earn on each stock given its riskiness in order to hold it? (What does each investment do to her overall risk?)

Reference no: EM131980640

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