Question
An investor holds a portfolio with the following weights: 20% in T-bills, 50% in the S&P500 equity index, 10% in Google and 10% in Amazon.
An investor holds a portfolio with the following weights: 20% in T-bills, 50% in the S&P500 equity index, 10% in Google and 10% in Amazon. The actual returns on these assets over the last 5 years are as follows:
Year | T-bills | S&P equity index | Amazon | |
1 | 0.01 | 0.06 | 0.12 | 0.01 |
2 | 0.01 | 0.09 | 0.08 | -0.20 |
3 | 0.02 | 0.01 | -0.02 | 0.16 |
4 | 0.01 | -0.02 | 0.06 | 0.14 |
5 | 0.01 | 0.03 | 0.20 | -0.02 |
What is the arithmetic average return on each of the assets? What is the geometric average return on each of the assets? What is the sample variance for each of the assets? What is the sample standard deviation for each of the assets? What is the arithmetic average return across the 4 assets (ignoring the relative weights the investor has in each asset within her portfolio) for each of the 5 years? What is the return on the portfolio (i.e., the weighted average return across the 4 assets) for each of the 5 years?
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