I need a answer for this cfa probelm
difference in the complete portfolios that you find in parts () and l you devote to Third-In-Three? year between Third-In-Three g. Is the rational allocation to the risky portfo than it is for a longer-term three-year investor? In other words, does "time diversifica- tion" imply that long-term investors should devote a higher fraction of their invest- ment budget to the risky portfolio? lio for a one-year investor any different CFA Problems 1. A three-asset portfolio has the following characteristics: CFA Asset Expected Return PROB Standard Deviation -weight 15% 22% 0.50 0.40 0.10 10 What is the expected return on this three-asset portfolio? (LO 6-1) 2. George Stephenson's current portfolio of $2 million is invested as follows: Summary of Stephenson's Current Portfolio Percent of Expected Percent of Total Annual Value ReturnStandard Deviation Short-term bonds Domestic large-cap equities Domestic small-cap equities1.200,00060 Total portfolio 4.6% 12.4 16.0 13.8% $ 200,000 10% 1.6% 19.5 29.9 23.1% 600,000 30 $2.000,000 100% Stephenson soon expects to receive an additional $2 million and plans to invest the entire amount in an index fund that best complements the current portfolio. Stephanie Coppa CFA, is evaluating the four index funds shown in the following table for their ability to produce a portfolio that will meet two criteria relative to the current portfolio: (1) main- tain or enhance expected return and (2) maintain or reduce volatility Each fund is invested in an asset class that is not substantially represented in the cur- rent portfolio Index Fund Characteristics Expected AnnualExpected AnnualCorrelation of Returns Standard Deviation with Current Portfolio Return Index Fund +0.80 +0.60 +0.90 +0.65 25% 15% Fund A Fund B Fund C Fund D 25 16 14