Question

Portfolio analysis???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? 2016-2019:

	Expected Return
Year	Asset F		Asset G		Asset H
2016	15?%		16?%	???	13?%	???
2017	16?%		15?%		14?%
2018	17?%		14?%		15?%
2019	18?%		13?%		16?%

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.??Calculate the expected return over the? 4-year period for each of the three alternatives.

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?

Answer 1

	Year	Asset F	G	H
	2016	15	16	13
	2017	16	15	14
	2018	17	14	15
	2019	18	13	16
Average return = using average function in MS excel		16.5	14.5	14.5
standard deviation= using stdevp function in ms excel		1.118034	1.118034	1.118034
coefficient of variance = standard deviation/mean		6.78%	7.71%	7.71%
		return		risk
Investment 1		16.50%		6.78%
Investment 2	(.5*.165)+(.5*.145)	15.5%	(.5*.678)+(.5*.771%)	34%
Investment 3	(.5*.165)+(.5*.145)	15.5%	(.5*.678)+(.5*.771%)	34%
Investment in alternative 1 is better as return is high and risk is low