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Here are the returns on two stocks

Finance

Here are the returns on two stocks. 
                          Digital Cheese            Executive Fruit 
January                  +16                             +9

February                 -4                               +1

March                     +6                               +7

April                        +8                               +16

May                        -5                                 +2

June                      +4                                 +7 

July                        -3                                  -4

August                   -9                                  -3 

Required:

a-1) Calculate the variance and standard deviation of each stock.

a-2) Which stock is riskier if held on its own?

b) Now calculate the returns in each month of a portfolio that Invests an equal amount each month In the two stocks.

c) Is the variance more or less than halfway between the variance of the two Individual stocks?

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a-1) Variance for Digital Cheese = 60.23

Standard deviation for Digital Cheese = 7.76

Variance for Executive Fruit = 38.98

Standard deviation for Executive Fruit = 6.24

a-2) The standard deviation is higher for Digital Cheese and hence it is riskier than Executive Fruit.

b) Please see the attachment:

c) Standard deviation of the portfolio is less than half way between variance of Digital Cheese and  Executive Fruit.

Download Attached File

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