The V olatility of a La r g e P o r t f olio Using the data in Table 11.1, a. Compute the annual

The V olatility of a La r g e P o r t f olio

Using the data in Table 11.1,

a. Compute the annual returns for a portfolio with 25% invested in North Air, 25% invested in West Air, and 50% invested in Tex Oil.

b. What is the lowest annual return for your portfolio in part a? How does it compare with the lowest annual return of the individual stocks or portfolios in Table 11.1?

	Stock Returns		Portfolio Returns
Year	North Air West Air	Tex Oil	1/2RN + 1/2RW 1/2RW + 1/2RT
2007	21% 9%	-2%	15.0% 3.5%
2008	30% 21%	-5%	25.5% 8.0%
2009	7% 7%	9%	7.0% 8.0%
2010	-5% -2%	21%	-3.5% 9.5%
2011	-2% -5%	30%	-3.5% 12.5%
2012	9% 30%	7%	19.5% 18.5%
Average Return	10.0% 10.0%	10.0%	10.0% 10.0%
Volatility	13.4% 13.4%	13.4%	12.1% 5.1%