1. Frame the issue. Briefly describe why South Carolina is planning to invest state pensionmoney in the stock market.2. Briefly discuss the pros and cons of investing in the stock market.3. Compute the mean and standard deviation for the returns corresponding to each of theasset classes in Exhibit 1. Discuss the risk and return relation for stocks and bonds.4. Calculate the mean monthly returns and standard deviations for each of the Dow 30stocks (in Exhibit 2) over January 1990 to June 1998 period. Compare the mean returnand standard deviation relation across the Dow 30 stocks versus the mean return andstandard deviation relation across the various asset classes from Exhibit 1.Note: To facilitate a meaningful comparison between Exhibit 2 and Exhibit 1, you mayannualize the monthly return statistics by the following approximating convention:mean annual return ˜ 12*(mean monthly return)standard deviation of annual return ˜ v12 *(standard deviation of monthly return)5. Compute the mean return and the standard deviation of 2-stock portfolio consisting ofExxon and General Electric. Compare the portfolio standard deviation to the averagestandard deviation of the two stocks. Repeat the analysis for General Electric andGeneral Motors.6. Compute the mean return and the standard deviation of 5-stock portfolio (your pick ofany 5 stocks) in the Dow 30. Compare the portfolio standard deviation to the averagestandard deviation of the five stocks.7. Compute the mean return and the standard deviation of 10-stock portfolio (your pick ofany 10 stocks) in the Dow 30. Compare the portfolio standard deviation to the averagestandard deviation of the ten stocks.8. Compute the mean return and the standard deviation of 20-stock portfolio (your pick ofany 20 stocks) in the Dow 30. Compare the portfolio standard deviation to the averagestandard deviation of the twenty stocks.9. Discuss the relation between the number of firms in a portfolio and the standarddeviation of the portfolio.10. Compute average returns and standard deviations corresponding to country bond andstock data displayed in Exhibit 3. Compare and discuss the difference between stocksand bonds for the country data.11. Compute the mean return and the standard deviation of 2-country stock portfolioconsisting of Germany and The Netherlands. Compare the portfolio standard deviationto the average standard deviation of the two countries. Repeat the analysis for Germanyand Japan.12. In your opinion, what are three key learning points from this case?

Attachments:

FIN621-Assign….pdfFIN-621-Assig….xlsx