Consider the situation where you have $100,000 to invest. Using the returns for the two portfolios you calculated in Question a and b , calculate the value of each portfolio after one year, and then after ten years.

 

(Include enough working to show you understand the calculations.)

a. expected return portfolio 1

30% x 3% [cash] + 50% x 3.5% [fixed interest]+15% x 6.3% [property] + 5% x 6.5% [shares]= 3.92%

expected return portfolio 2

5% x 3% [cash] + 95% x 6.5% [shares] = 6.325%

 

b. expected coefficient of variation for portfolio 1

=5.6%/3.92%

=1.42857

expected coefficient of variation for portfolio 2

=8.1%/6.325%

=1.281

	Portfolio 1	Portfolio 2
Cash	30%	5%
Fixed Interest	50%	0%
Property	15%	0%
Shares	5%	95%
Alternatives	0%	0%
	100%	100%
Risk (Standard Deviation)	5.6%	8.1%