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***Please show answers and explain how you derived to your answers :) *** Part 1: On a risk/return basis, rank order the following asset classes
***Please show answers and explain how you derived to your answers :) ***
Part 1: On a risk/return basis, rank order the following asset classes from lowest to highest based on the following data given, where E(r) is the expected return and the risk metric is the standard deviation. (a) Small stocks: E(r)=18.15% and standard deviation = 36.94%; (b) Large stocks: E(r)=11.50% and standard deviation =20.14%; (c) US Treasury bonds: E(r)=5.45% and standard deviation =8.06%; Part 2: How would this rank order change if the return for each class [i.e., the E(r)] were each reduced by a 3% inflation factor? Helpful Hint: The expression risk/return is mathematically expressed with the risk metric divided by the expected return. Part 1: On a risk/return basis, rank order the following asset classes from lowest to highest based on the following data given, where E(r) is the expected return and the risk metric is the standard deviation. (a) Small stocks: E(r)=18.15% and standard deviation = 36.94%; (b) Large stocks: E(r)=11.50% and standard deviation =20.14%; (c) US Treasury bonds: E(r)=5.45% and standard deviation =8.06%; Part 2: How would this rank order change if the return for each class [i.e., the E(r)] were each reduced by a 3% inflation factor? Helpful Hint: The expression risk/return is mathematically expressed with the risk metric divided by the expected returnStep by Step Solution
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