Question: The table below presents the year-end prices for the shares of Ford and PPG from 1989 to 2001:
a. Calculate the following statistics for these two shares: average return, variance of returns, standard deviation of returns, covariance of returns and correlation coefficient.
b. If you invested in a portfolio composed of 50% Ford and 50% PPG, what would be the portfolio expected return? the standard deviation?
c. Comment on the following statement: "Ford has lower returns and higher standard deviation of returns than PPG. Therefore any rational investor would invest in PPG only and would leave Ford out of her portfolio."