What are the standard deviations of the returns for stocks
A and B? Suppose you want to use this historyas a guide to making an investment decision
for the long run. Based on this history, and assuming that standard deviationof return
is the appropriate measure of risk, does it make any difference whether you invest
wholly in stock A, wholly in stock B, or half in stock Aand half in stock B? Assume that
average return is to be maximized and risk is to be minimized, if that is jointly possible.
Stocks A and B case study
(See attached file for full problem description)
AVERAGE 0.18000 0.17992 0.17996
STANDARD DEVIATION 0.100013673 0.099820214
Suppose you want to use this history as a guide to making an investment decision
for the long run. Based on this history, and assuming that …
This explains the steps to calculate the return and risk of the stocks.