Please go to Yahoo! Finance (http://finance.yahoo.com) and download any two stocks’ daily stock prices in 2019. Please complete this question in Excel and upload the Excel file with all formulas.
a. Calculate their daily returns in 2019;
b. Estimate the average return, return variance and return volatility for both stocks;
c. Estimate the correlation between these two stocks;
d. Construct a portfolio consisting of 50% of each stock. What’s the portfolio’s Sharpe ratio? Compare it to the Sharpe ratio of each stock.
(Hint: you can use the 1-year T-bill rate, or any other similar treasury rate from various sources, as an approximation of the risk-free rate.)
e. Finally, find the betas of the two stocks from Yahoo! Finance. What are the expected returns of the two stocks and the portfolio, assuming a risk-free rate of 1% and an expected market return of 8%?
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