Portfolio analysis You have been given the expected return data shown in the fir
ID: 2794791 • Letter: P
Question
Portfolio analysisYou have been given the expected return data shown in the first table on three
assetslong dash—F,
G, and
Hlong dash—over
the period 2016-2019:
Expected Return
Year
Asset F
Asset G
Asset H
2016
12%
13%
10%
2017
13%
12%
11%
2018
14%
11%
12%
2019
15%
10%
13%
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?
Please round to two decimal places and mark or highlight which one is the answer!
Expected Return
Year
Asset F
Asset G
Asset H
2016
12%
13%
10%
2017
13%
12%
11%
2018
14%
11%
12%
2019
15%
10%
13%
Explanation / Answer
Select Alternative 2 as it has the lowest CV and zero standard deviation.
Year Asset F Asset G Asset H Alt. 1 Alt. 2 Alt. 3 2016 12% 13% 10% 12.00% 12.50% 11.00% 2017 13% 12% 11% 13.00% 12.50% 12.00% 2018 14% 11% 12% 14.00% 12.50% 13.00% 2019 15% 10% 13% 15.00% 12.50% 14.00% Returns 13.50% 12.50% 12.50% S.D. 1.29% 0.00% 1.29% CV 9.56% 0.00% 10.33%