Expected Return Year Asset F Asset G Asset H 2016 16% 17% 14% 2017 17 16 15 2018 18 15 16 2019 19 14 17 Using these assets, you have isolated the three investment Alternatives shown in the following table Alternative Investment 1 100% of F 2 50% of f and G 3 50% of f and H a. calculate the expected return over the 4 year period for all three alternatives b. calculate the standard deviation of returns ov the 4 year periof for each of the three alternatives c. Use your finding in part a and b to calculate the coefficient of variation for the three alternatives d. on the basis of your findings, which of the three investment alternaives do you recommend, why?
| Expected Return | ||||||||
| Year | Asset F | Asset G | Asset H | |||||
| 2016 | 16% | 17% | 14% | |||||
| 2017 | 17 | 16 | 15 | |||||
| 2018 | 18 | 15 | 16 | |||||
| 2019 | 19 | 14 | 17 | |||||
| Using these assets, you have isolated the three investment | ||||||||
| Alternatives shown in the following table | ||||||||
| Alternative | Investment | |||||||
| 1 | 100% of F | |||||||
| 2 | 50% of f and G | |||||||
| 3 | 50% of f and H | |||||||
| a. calculate the expected return over the 4 year period for all three alternatives | ||||||||
| b. calculate the standard deviation of returns ov the 4 year periof for each of the three alternatives | ||||||||
| c. Use your finding in part a and b to calculate the coefficient of variation for the three alternatives | ||||||||
| d. on the basis of your findings, which of the three investment alternaives do you recommend, why? | ||||||||
Related questions
Jamie Wong is considering building a portfolio containing two assets, L and M. Asset L will represent 40% of the dollar value of the portfolio, and asset M will account for the other 60%. The expected returns over the next 6 years, 2004–2009, for each of these assets, are shown in the following table.
| Year | Asset L | Asset M |
| 2004 | 14% | 20% |
| 2005 | 14 | 18 |
| 2006 | 16 | 16 |
| 2007 | 17 | 14 |
| 2008 | 17 | 12 |
| 2009 | 19 | 10 |
a. Calculate the expected portfolio return.
b. Calculate the standard deviation of expected portfolio returns.
c. Find out covariance and correlation coefficient.
| Asset D | Asset C | ||
| Rate of Return | Probability | Rate of Return | Probability |
| 10% | 30% | 5% | 40% |
| 15% | 40% | 15% | 20% |
| 20% | 30% | 25% | 40% |
For each asset, compute
(a) the expected rate of return.
(b) the standard deviation of the expected return.
(c) the coefficient of variation of the return.
(d) Which asset should you select?
If you invested 60% of your money in asset D and 40% in asset C, for the portfolio, compute
(e) the expected rate of return.
(f) the standard deviation of the expected return.
(g) the coefficient of variation of the return.
(h) interpret your answer with 68.2% confidence.
