Question

You have been given the expected return data shown in the first table on three assets—F,...

  1. You have been given the expected return data shown in the first table on three assets—F, G, and H—over the period 2016-2019

Year

Asset F

Asset G

Asset H

2016

7

10

15

2017

6

8

16

2018

3

19

19

2019

11

9

11

Using these assets, you have isolated the three investment alternatives shown in the following table.

Alternative

Investment

1

100% of asset F

2

75% of asset F and 25% of asset G

3

50% of asset F and 50% of asset H

a) Calculate the expected return over the 4-year period for each of the three alternative

b)Calculate the standard deviation of returns over the 4-year period for each of the three alternatives.

c)Use your findings in parts a and b to calculate the coefficient of variation for each of the three alternatives.

d)On the basis of your findings, which of the three investment alternatives do you recommend? Why?

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