you have been given the expected return data shown in the first table on three
assetslong dash—F,
G, and
H long dash—over
the period 20162019:
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 asset F 

2 
50% of asset F and 50% of asset G 

3 
50% of asset F and 50% of asset H 
a. The expected return over the 4year period for alternative 1 is
17.50%.
The expected return over the 4year period for alternative 2 is
16.50%.
The expected return over the 4year period for alternative 3 is
16.50%.
b. The standard deviation of returns over the 4year period for alternative 1 is
1.29%.
The standard deviation of returns over the 4year period for alternative 2 is
0.00%.
The standard deviation of returns over the 4year period for alternative 3 is
1.29%.
Use your findings in parts a and b to calculate the coefficient of variation for each of the three alternatives
Coefficient of variation is a statistical measure which compares the expected return that is mean and volatility of return that is standard deviation to calculate the riskreturn trade off of investments. From the investor’s point of view, a lower coefficient of variation is desirable.
Use information of mean and standard deviation of alternative 1 to compute the coefficient of variation for alternative 1 using the equation as follows:
Hence, coefficient of variation for alternative 1 is 7.37%.
Use information of mean and standard deviation of alternative 2 to compute the coefficient of variation for alternative 2 using the equation as follows:
Hence, coefficient of variation for alternative 2 is 0%.
Use information of mean and standard deviation of alternative 3 to compute the coefficient of variation for alternative 3 using the equation as follows:
Hence, coefficient of variation for alternative 3 is 7.82%.
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