Calculate the average rate of return for each stock


Problem:

Stock A and B have the following historical returns:

YEAR    STOCK A'S RETURNS    STOCK B'S RETURNS
1998    (18.00%)    (14.50%)
1999     33.00%       21.80%
2000     15.00%       30.50%
2001     (0.50%)      (7.60%)
2002     27.00%       26.30%

Q1) Calculate the average rate of return for each stock during the period 1998 through 2002.

Q2) Assume that an investor held a portfolio consisting of 35% of Stock A and 65% of Stock B. What would be i) the average return of the portfolio, and ii) the beta of the portfolio in each year, during the period 1998 through 2002?

Q3) Calculate the standard deviation of returns for each stock and for the portfolio.

Q4) Calculate the coefficient of variation for each stock and for the portfolio.

Q5) If you are a risk-averse investor, would you prefer to hold Stock A, Stock B, or the portfolio?

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Finance Basics: Calculate the average rate of return for each stock
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