Consider the Following Historical Data for the Returns on Assets

question 21

Essay

Consider the following historical data for the returns on assets A and B and the market portfolio:
$\begin{array}{|c|c|c|c|}\hline \text { Period } & \text { Asset A } & \text { Asset B } & \text { Market Portfolio } \\\hline 1 & 10 \% & 6 \% & 4 \% \\\hline 2 & 3 \% & 6 \% & 1 \% \\\hline 3 & 5 \% & 2 \% & 5 \% \\\hline 4 & 2 \% & 4 \% & 2 \% \\\hline 5 & 1 \% & 2 \% & 1 \% \\\hline\end{array}$

a. What is the covariance between asset A and asset B?
b. If the beta of asset B is 0.5, what is the systematic return and non-systematic return for asset B in each period?

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Definitions:

Variance

A measure of the dispersion or spread of a set of data points around their mean value.

Numerical Value

A quantitative measurement or amount usually expressed as a number or a set of numbers.

Population Size

The total number of members in a defined population.

Symbols

Characters or glyphs that are used to represent objects, functions, or processes.