$\begin{array}{|c|c|c|}
\hline \text { Asset } & \begin{array}{c}
\text { Price at } \
\text { start of } \
\text { period (\$) }
\end{array} & \begin{array}{c}
\text { Price at } \
\text { end of } \
\text { period (\$) }
\end{array} \
\hline \text { A } & \$ 3.25 & \$ 4.25 \
\hline \text { B } & \$ 4.12 & \$ 3.85 \
\hline & & \
\hline
\end{array}$
-Given the prices for A and B at the start and end of the period,calculate the continuously compounded return on an equally weighted portfolio consisting of assets A and B.
A) $8.20 \%$
B) $9.60 \%$
C) $10.00 \%$
D)$12.8 \%$

Question

$\begin{array}{|c|c|c|}
\hline \text { Asset } & \begin{array}{c}
\text { Price at } \
\text { start of } \
\text { period (\$) }
\end{array} & \begin{array}{c}
\text { Price at } \
\text { end of } \
\text { period (\$) }
\end{array} \
\hline \text { A } & \$ 3.25 & \$ 4.25 \
\hline \text { B } & \$ 4.12 & \$ 3.85 \
\hline & & \
\hline
\end{array}$
-Given the prices for A and B at the start and end of the period,calculate the continuously compounded return on an equally weighted portfolio consisting of assets A and B.
A) $8.20 \%$ 
B) $9.60 \%$ 
C) $10.00 \%$
D)$12.8 \%$

Quizplus · Accepted Answer

Using equation 1.5,page 14,the continuously compounded return for share A is ln(4.25/3.25)= 0.268 or 26.8%,and for share B is ln(3.85/4.12)= -0.068 or -6.8%.Using equation 1.15,page 23,the equally weighted (continuously compounded)return on the portfolio is 0.5(26.8)+ 0.5(-6.8)= 10%.

-Given the Prices for a and B at the Start