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as372w10a2

# as372w10a2 - ActSc 372 Winter 2010 Assignment 2 Due Date...

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ActSc 372 Winter 2010 Assignment 2 Due Date: Friday, February 5, 2010 (Beginning of Class) 1. The returns on small-capitalization stocks and on the S&P/TSX 300 Index of common stocks from 2001 through 2005 are tabulated as follows: Small-Capitalization Market Index of Year Stocks Common Stocks 1991 18.51% 12.02% 1992 13.01% -1.43% 1993 52.06% 32.56% 1994 -9.21% -0.18% 1995 12.55% 14.53% (a) Calculate the average return for the small-capitalization stocks and the market index of common stocks (b) Calculate the variance and standard deviation of returns for the small-capitalization stocks and the market index of common stocks (c) Calculate the correlation between the returns for the small-capitalization 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 12.3 -3.7 Normal 0.5 6.5 3 Bull 0.3 3 5 (a) Calculate the expected return of each stock.

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as372w10a2 - ActSc 372 Winter 2010 Assignment 2 Due Date...

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