[Recommended]Fiin550 Fin560 Chap7 3

Fiin550 fin560   Chap7   3. The following are the monthly rates of return for Madison Cookies and for Sophie Electric during a six-month period.…

Fiin550 fin560
 
Chap7
 
3. The following are the monthly rates of return for Madison Cookies and for Sophie Electric during a six-month period.
 
Compute the following.
 
a. Average monthly rate of return for each stock 
 
b. Standard deviation of returns for each stock
 
c. Covariance between the rates of return
 
d. The correlation coefficient between the rates of return
 
What level of correlation did you expect? How did your expectations compare with the computed correlation? Would these two stocks be good choices for diversification? Why or why not?
 
7. The following are monthly percentage price changes for four market indexes.
 
Compute the following.
 
a. Average monthly rate of return for each index 
 
b. Standard deviation for each index
 
c. Covariance between the rates of return for the following indexes: DJIA–S&P 500 S&P 500–Russell 2000 S&P 500–Nikkei Russell 2000–Nikkei
 
d. The correlation coefficients for the same four combinations 
the answers from parts (a), (b), and (d), calculate the expected return and standard deviation of a portfolio consisting of equal parts of (1) the S&P and the Russell 2000 and (2) the S&P and the Nikkei. Discuss the two portfolios.
 
8. The standard deviation of Shamrock Corp. stock is 19 percent. The standard deviation of Cara Co. stock is 14 percent. The covariance between these two stocks is 100. What is the correlation between Shamrock and Cara stock?
The post Fiin550 Fin560 Chap7 3 .
Assignment status: Solved by our experts

>>>Click here to get this paper written at the best price. 100% Custom, 0% plagiarism.<<<

Leave a Reply

Your email address will not be published. Required fields are marked *