Question

1. You have been given the expected return data shown in the table on two assets, F and G, over the period 2010-2013.

	Expected return
Year	Asset F	Asset G
2010	16%	15%
2011	12	13
2012	18	17
2013	20	12

If you invest 70% of your funds in asset F and 30% to asset G,

1. Calculate the expected return over the 4-year period for the portfolio.
2. Calculate the standard deviation of returns over the 4-year period for the portfolio.

Answer 1

	Asset F	Asset G
	a.	b	c.	d
Year	% of Fund	Expected Return	% of Fund	Expected Return	Expected Return of Portfolio=a*b+c*d	Portfolio return-Average Portfolio Return	Square of (Portfolio return-Average Portfolio Return )
2010	70%	16.00%	30%	15%	15.70%	-0.13%	0.0001563%
2011	70%	12.00%	30%	13%	12.30%	-3.53%	0.1242563%
2012	70%	18.00%	30%	17%	17.70%	1.88%	0.0351563%
2013	70%	20.00%	30%	12%	17.60%	1.78%	0.0315063%
Total Return in 4 years					63.30%	Total	0.1910750%
Average Return/Year=					15.83%

So Average Annual Return of the portfolio over 4 yrs =		15.83%
Variance of Portfolio return =		0.1910750%
Std Deviation of Portfolio return =Sq Rt of variance= 0.1910750%^0.5=		4.371%