1) Task of best stock solutions:
Renee is considering investing in 3 various stocks or creating three different 2 stock portfolios. Renee considers herself to be the conservative investor. She is able to get forecasted returns for 3 securities for years 2013 through 2019. Data are as given below:
Year Stock A Stock B Stock C
2013 10% 10% 12%
2014 13% 11% 14%
2015 15% 8% 10%
2016 14% 12% 11%
2017 16% 10% 9%
2018 14% 15% 9%
2019 12% 15% 10%
In Any of the 2 likely stock portfolios, weight of each stock in portfolio will be= 50%. Three possible portfolio combinations are= AB, AC, BC.
Carry out the following:
i) Make a spreadsheet to reply the following questions?
ii) Compute expected return for each individual stock .
iii) Compute the standard Deviation for each individual stock.
iv) Compute expected returns for portfolio AB, AC, BC.
iv) Compute standard Deviations for portfolios AB, AC, BC
v) Would you suggest that Jane invest in single stock A or portfolio consisting of stocks A and B? Describe your reply from the risk return view point.
vi) Would you suggest that Jane invest in single stock B or the portfolio consisting of stocks B and C? Describe your reply from a risk return view point.