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ThehonestThe following table contains historical returns on Stocks A and B and the Market (M).
A) Calculate the mean returns, standard deviations of returns and covariances from the data.
B) Run Regressions and establish single index model equations for Stock A and Stock B
C) For the portfolio formed be investing 40% in A and 60% in B, Calculate expected return and the standard deviation using historical data and using single index model. Are the results the same? why or why not Data: Table of rates of returns: Year Stock A Stock B Market
Year Stock A Stock B Market
1 11 20 5
2 12 10 15
3 1 -2 0
4 4 1 3
5 18 13 9
6 6 3 -1
7 12 10 16
8 18 14 9
9 12 17 11
10 8 7 10
11 20 17 12
12 13 10 14
13 8 12 8
14 15 6 6
15 20 9 8
16 18 18 13
17 12 12 8
18 -5 80 0
19 17 20 7
20 12 8 8
- 10 years ago
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