Read the case given below and answer the questions given at the end.
CASE STUDY – I
Stocks ABC and XYZ have the following historical returns:
- a.Calculate the average rate of return for each stock during the period 2005 through 2009. Assume that someone held a portfolio consisting of 50 percent of Stock ABC and 50 percent of Stock XYZ. What would have been the realized rate of return on the portfolio in each year from 2005 through 2009? What would have been the average return on the portfolio during this period?
b. Calculate the standard deviation of returns for each stock and for the portfolio.ASE