Question
Assume you are considering a portfolio containing two assets, L and M. Asset L will represent 40% of the dollar value of the portfolio, and
Assume you are considering a portfolio containing two assets, L and M. Asset L will represent 40% of the dollar value of the portfolio, and asset M will account for the other 60%. The projected returns over the next six years, 20182023, for each of these assets are summarized in the following table.
Year | Asset L | Asset M |
2018 | 14% | 20% |
2019 | 14% | 18% |
2020 | 16% | 16% |
2021 | 17% | 14% |
2022 | 17% | 12% |
2023 | 19% | 10% |
I've done the math already, So the expected portfolio return for each year is as follows: 2018 - 17.6%, 2019 - 16.4%, 2020 - 16.0%, 2012 - 15.2%, 2022 - 14.0%%, 2023 - 13.6%. The Average Portfolio Return = 15.5% and the Standard deviation = 1.51%. The question is: How would you characterize the correlation of return of the assets L and M?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started