Question
a. An investment analyst, you have been asked for your advice in selecting a portfolio of assets and have been given the following data: Expected
a. An investment analyst, you have been asked for your advice in selecting a portfolio of assets and have been given the following data:
Expected | Return | ||
Year | Asset A | Asset B | Asset C |
2019 | 12% | 16% | 12% |
2020 | 14 | 14 | 14 |
2021 | 16 | 12 | 16 |
You have been told that you can create two portfolio one consisting of assets A and B and the other consisting of assets A and C by investing equal proportions (50%) in each of the two component assets.
i. What is the expected return for each asset over the 3-year period?
ii. What is the standard deviation for each assets return? iii. What is the expected return for each of the two portfolios? vi. What is the standard deviation for each portfolio?
v. Which portfolio do you recommend? Why?
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