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Chapter_11_12_13_sol

# 31079056 021727489 002496211 000177389 variance stdev

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Unformatted text preview: 27.9% 2004 6.7% 17.3% -5.1% 2005 17.9% 0.9% -11.3% 8) The covariance between Lowesʹ and Home Depotʹs returns is closest to: A) 0.10 B) 0.29 C) 0.12 D) 0.69 Answer: A Lowes Home Depot (RL - RL) Explanation: A) Lowes Home Depot Realized Return 20.1% 72.7% -25.7% 56.9% 6.7% 17.9% 24.8% Realized Return -14.6% 4.3% -58.1% 71.1% 17.3% 0.9% 3.5% Deviation (RL - RL) Deviation (RH - RH) × (RH - RH) -4.7% 47.9% -50.5% 32.1% -18.1% -6.9% -18.1% 0.8% -61.6% 67.6% 13.8% -2.6% 0.00843889 0.00391456 0.31079056 0.21727489 -0.02496211 0.00177389 Variance = Stdev = Year End 2000 2001 2002 2003 2004 2005 average = 0.125447467 0.354185639 0.177795367 0.421657879 Covariance = 0.103446133 Correlation = 0.692664763 B) C) D) 9) The Correlation between Lowesʹ and Home Depotʹs returns is closest to: A) 0.58 B) 0.29 C) 0.69 D) 0.10 Answer: C Explanation: A) B) Lowes Home Depot (RL - RL) C) Lowes Home Depot Realized Return 20.1% 72.7% -25.7% 56.9% 6.7% 17.9% 24.8% Realized Return -14.6% 4.3% -58.1% 71.1% 17.3% 0.9% 3.5% Deviation (RL - RL) Deviation (RH - RH) × (RH - RH) -4.7% 47.9% -50.5% 32.1% -18.1% -6.9% -18.1% 0.8% -61.6% 67.6% 13.8% -2.6% 0.00843889 0.00391456 0.31079056 0.21727489 -0.02496211 0.00177389 Variance = Stdev = Year End 2000 2001 2002 2003 2004 2005 average = 0.125447467 0.354185639 0.177795367 0.421657879 Covariance = 0.103446133 Correlation = 0.692664763 D) 10) The variance on a portfolio that is made up of equal investments in Lowes and Home Depot stock is closest to: A) 0.12 B) 0.10 C) 0.69 D) 0.29 Answer: A Lowes Home Depot (RL - RL) Explanation: A) Lowes Home Depot Realized Return 20.1% 72.7% -25.7% 56.9% 6.7% 17.9% 24.8% Realized Return -14.6% 4.3% -58.1% 71.1% 17.3% 0.9% 3.5% Deviation (RL - RL) Deviation (RH - RH) × (RH - RH) -4.7% 47.9% -50.5% 32.1% -18.1% -6.9% -18.1% 0.8% -61.6% 67.6% 13.8% -2.6% 0.00843889 0.00391456 0.31079056 0.21727489 -0.02496211 0.00177389 Variance = Stdev = Year End 2000 2001 2002 2003 2004 2005 average = 0.125447467 0.354185639 0.1777...
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