hw2_new - University of Hong Kong Department of Economics...

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University of Hong Kong Department of Economics and Finance FINA 2802C – Investment and Portfolio Analysis First Semester: 2007-2008 Dr. Kam-Ming Wan Problem Set 2 Due Date: October 11, 2007 (Thur. by 9:30am) 1) Historical Returns Here are some returns of Vanguard mutual fund for the period 1993 - 1998. Unit in percentage 1993 1994 1995 1996 1997 1998 500 index return (%) 9.9 1.2 37.4 22.9 33.2 28.6 Total stock market index return 10.6 -0.2 35.8 21 31.0 23.3 Small-Cap index return 18.7 -0.5 28.7 18.1 24.6 -2.6 Long-term Treasury fund return 17.25 -7.64 30.69 -0.87 15.08 13.52 Short-term Treasury fund return 6.91 -0.80 12.70 4.55 7.11 7.76 a. Compute the six-year holding period return for each type of fund. b. Compute the arithmetic (simple) average return and standard deviation for each type of security. c. Compute the geometric average return for each type of security. 2) Risk and Return Henry can invest in Stock A and Stock B. His projection of the returns on these two stocks is as follows:
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hw2_new - University of Hong Kong Department of Economics...

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