Stock Rates of Return

Historical Realized Rates of Return

Stocks A and B have the following historical returns:

Year
2009	-24.30%	-14.60%
2010	33.75	28.40
2011	12.25	21.30
2012	-3.75	-5.50
2013	33.00	21.35

0. Calculate the average rate of return for each stock during the 5-year period. Round your answers to two decimal places.

Stock A	HTMLCONTROL Forms.HTML:Text.1 Item 1 %
Stock B	HTMLCONTROL Forms.HTML:Text.1 Item 2 %

1. Assume that someone held a portfolio consisting of 50% of Stock A and 50% of Stock B. What would have been the realized rate of return on the portfolio in each year? What would have been the average return on the portfolio during this period? Round your answers to two decimal places.

Year	Portfolio
2009	HTMLCONTROL Forms.HTML:Text.1 Item 3 %
2010	HTMLCONTROL Forms.HTML:Text.1 Item 4 %
2011	HTMLCONTROL Forms.HTML:Text.1 Item 5 %
2012	HTMLCONTROL Forms.HTML:Text.1 Item 6 %
2013	HTMLCONTROL Forms.HTML:Text.1 Item 7 %
Average return	HTMLCONTROL Forms.HTML:Text.1 Item 8 %

2. Calculate the standard deviation of returns for each stock and for the portfolio. Round your answers to two decimal places.

	rA	rB	Portfolio
Std. Dev.	HTMLCONTROL Forms.HTML:Text.1 Item 9 %	HTMLCONTROL Forms.HTML:Text.1 Item 10 %	HTMLCONTROL Forms.HTML:Text.1 Item 11 %

If you are a risk-averse investor then, assuming these are your only choices, would you prefer to hold Stock A, Stock B, or the portfolio?