Consider the following stock price returns for Costco and Capital One. Demonstrate all your work. YEAR. COSTCO. CAPITAL ONE 1 0.47 0.26 2 -0.54 0.15 3 0.15 -0.14 4 0.07 -0.15 5 10 -0.28 0.02 67 0.4 -0.18 0.17 0.42 8 -0.23 0.3 9 -0.04 -0.32 10 0.75 0.28 a) Calculate the average return and risk of each of them. b) If the returns follow a normal distribution, what is the probability that Walmart's returns are between 6% and 8%? c) Build a set of portfolios with these returns, calculate their return, risk, construct the efficient frontier graph and select a portfolio, explain your selection.
Consider the following stock price returns for Costco and Capital One. Demonstrate all your work. YEAR. COSTCO. CAPITAL ONE 1 0.47 0.26 2 -0.54 0.15 3 0.15 -0.14 4 0.07 -0.15 5 10 -0.28 0.02 67 0.4 -0.18 0.17 0.42 8 -0.23 0.3 9 -0.04 -0.32 10 0.75 0.28 a) Calculate the average return and risk of each of them. b) If the returns follow a normal distribution, what is the probability that Walmart's returns are between 6% and 8%? c) Build a set of portfolios with these returns, calculate their return, risk, construct the efficient frontier graph and select a portfolio, explain your selection.
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter16: Financial Statement Analysis
Section: Chapter Questions
Problem 2MAD
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