## Answers

Excel Formulas are present in the below table

Stock A | Stock B | Stock C | ||||

2012 | 10.00% | 10.00% | 12.00% | |||

2013 | 13.00% | 11.00% | 14.00% | |||

2014 | 15.00% | 8.00% | 10.00% | |||

2015 | 14.00% | 12.00% | 11.00% | |||

2016 | 16.00% | 10.00% | 9.00% | |||

2017 | 14.00% | 15.00% | 9.00% | |||

2018 | 12.00% | 15.00% | 10.00% | |||

Expected Return | 13.43% | 11.57% | 10.71% | |||

Standard Deviation | 0.019880596 | 0.026367 | 0.017995 | |||

Coefficient of Variation | 0.148046991 | 0.227866 | 0.167951 | |||

Weighted Average | 0.5 | |||||

Stock AB | Stock BC | Stock CA | ||||

2012 | 10.00% | 11.00% | 11.00% | |||

2013 | 12.00% | 12.50% | 13.50% | |||

2014 | 11.50% | 9.00% | 12.50% | |||

2015 | 13.00% | 11.50% | 12.50% | |||

2016 | 13.00% | 9.50% | 12.50% | |||

2017 | 14.50% | 12.00% | 11.50% | |||

2018 | 13.50% | 12.50% | 11.00% | |||

Overall Expected Return | 12.50% | 11.14% | 12.07% | |||

Standard Deviation | 0.014719601 | 0.014058 | 0.009322 | |||

Coefficient of Variation | 0.117756812 | 0.126159 | 0.077226 | |||

Stock A has an expected return of | 13.43% | with a standard deviation of | 0.019881 | |||

Investing in port. AB has return of | 12.50% | with a standard deviation of | 0.01472 | |||

so there is both a | Low | amount of risk and return in the portfolio | ||||

We can see that the CV of portfolio is | smaller | than that of stock A alone, so the portfolio AB should be recommended | ||||

Stock B has an expected return of | 11.57% | with a standard deviation of | 0.026367 | |||

Investing in port. BC has return of | 11.14% | with a standard deviation of | 0.014058 | |||

so there is both a | low | amount of risk and return in the portfolio | ||||

We can see that the CV of portfolio is | smaller | than that of stock B alone, so the portfolio BC should be recommended |

Stock A | Stock B | Stock C | ||||

2012 | 0.1 | 0.1 | 0.12 | |||

2013 | 0.13 | 0.11 | 0.14 | |||

2014 | 0.15 | 0.08 | 0.1 | |||

2015 | 0.14 | 0.12 | 0.11 | |||

2016 | 0.16 | 0.1 | 0.09 | |||

2017 | 0.14 | 0.15 | 0.09 | |||

2018 | 0.12 | 0.15 | 0.1 | |||

Expected Return | =AVERAGE(B2:B8) | =AVERAGE(C2:C8) | =AVERAGE(D2:D8) | |||

Standard Deviation | =STDEV(B2:B8) | =STDEV(C2:C8) | =STDEV(D2:D8) | |||

Coefficient of Variation | =B11/B9 | =C11/C9 | =D11/D9 | |||

Weighted Average | 0.5 | |||||

Stock AB | Stock BC | Stock CA | ||||

2012 | =$B$14*B2+$B$14*C2 | =$B$14*C2+$B$14*D2 | =$B$14*D2+$B$14*B2 | |||

2013 | =$B$14*B3+$B$14*C3 | =$B$14*C3+$B$14*D3 | =$B$14*D3+$B$14*B3 | |||

2014 | =$B$14*B4+$B$14*C4 | =$B$14*C4+$B$14*D4 | =$B$14*D4+$B$14*B4 | |||

2015 | =$B$14*B5+$B$14*C5 | =$B$14*C5+$B$14*D5 | =$B$14*D5+$B$14*B5 | |||

2016 | =$B$14*B6+$B$14*C6 | =$B$14*C6+$B$14*D6 | =$B$14*D6+$B$14*B6 | |||

2017 | =$B$14*B7+$B$14*C7 | =$B$14*C7+$B$14*D7 | =$B$14*D7+$B$14*B7 | |||

2018 | =$B$14*B8+$B$14*C8 | =$B$14*C8+$B$14*D8 | =$B$14*D8+$B$14*B8 | |||

Overall Expected Return | =$B$14*B9+$B$14*C9 | =$B$14*C9+$B$14*D9 | =$B$14*D9+$B$14*B9 | |||

Standard Deviation | =STDEV(B17:B23) | =STDEV(C17:C23) | =STDEV(D17:D23) | |||

Coefficient of Variation | =B26/B24 | =C26/C24 | =D26/D24 | |||

Stock A has an expected return of | =B9 | with a standard deviation of | =B11 | |||

Investing in port. AB has return of | =B24 | with a standard deviation of | =B26 | |||

so there is both a | Low | amount of risk and return in the portfolio | ||||

We can see that the CV of portfolio is | smaller | than that of stock A alone, so the portfolio AB should be recommended | ||||

Stock B has an expected return of | =C9 | with a standard deviation of | =C11 | |||

Investing in port. BC has return of | =C24 | with a standard deviation of | =C26 | |||

so there is both a | low | amount of risk and return in the portfolio | ||||

We can see that the CV of portfolio is | smaller | than that of stock B alone, so the portfolio BC should be recommended |

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