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Unformatted text preview: ActSc 372 Winter 2010 Assignment 2 Due Date: Friday, February 5, 2010 (Beginning of Class) 1. The returns on smallcapitalization stocks and on the S&P/TSX 300 Index of common stocks from 2001 through 2005 are tabulated as follows: SmallCapitalization Market Index of Year Stocks Common Stocks 1991 18.51% 12.02% 1992 13.01%1.43% 1993 52.06% 32.56% 19949.21%0.18% 1995 12.55% 14.53% (a) Calculate the average return for the smallcapitalization stocks and the market index of common stocks (b) Calculate the variance and standard deviation of returns for the smallcapitalization stocks and the market index of common stocks (c) Calculate the correlation between the returns for the smallcapitalization stocks and the market index of common stocks. 2. Suppose you have invested only in two stocks, A and B. You expect that returns on the stocks depend on the following three states of economy: State of Economy Probability Return on Stock A (%) Return on Stock B (%) Bear 0.2 12.33.7 Normal 0.50....
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This note was uploaded on 06/21/2010 for the course ACTSC 5255 taught by Professor Tan,kens during the Spring '10 term at Waterloo.
 Spring '10
 Tan,KenS

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