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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 problems?

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.

Basic Finance, Finance

  • Category:- Basic Finance
  • Reference No.:- M914856

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