Year Return Stock A Stock B Stock C 1 15 12 5 2 25 14 6 3 8

Year

Return

Stock A

Stock B

Stock C

1

15%

12%

   5%

2

25%

14%

-6%

3

  8%

  9%

10%

4

16%

25%

  1%

5

  5%

  3%

15%

Given the data above: What is the standard deviation of returns for stock A? What is the variance of returns for stock B? What is the average return of stock C? What is the average return of a portfolio that has 45% invested in stock A, 35% invested in stock B and the rest invested in stock C?

Solution

from the above data

Std.dev of return for Stock A 6.96%

Variance of returns for Stock B 52.24%

Average return of Stock C 5%

The average return of a portfolio that has 45% invested in stock A, 35% invested in stock B and the rest invested in stock C is 6.659%