Question 2 Risk and Return An analyst has undertaken historical studies of the returns of various asset classes under different economic conditions. These are her findings: Scenario Probability 1 2 3 Cash 1.50% 1.60% 0.30 -50% Expected Returns p.) Bonds Domestic Equities International Equities Residential Property Commercial Property 4.2% 27.0T 22.00% 9.00% 11.00 1.A. 15.00 150 7.00% 9.00 1.57% 7.00 3.00% 11.00% 0.7% -12 .. -14.00% 13.00 -18.00% Gold Silver Crude Ou 2.00% 9.TK 15.07% 5.00% 2.TK 6.OKT. 7.00% 4.07% 12.00% -11.00% -9.00 The returns data are collected from the last 10 years. Let x, y and z be the following: x = 10% if your first letter of your first name is A-H, 15% if I-P and 20% if Q-Z (my name starts with R= 20%) y = 40% if your first letter of your surname is A-H, 35% if I-P and 30% if Q-Z (my surname starts with A = 40%) z = 25% if your year of birth is an odd number and 20% if it is even. (even = 20%) Set up an appropriate spreadsheet that allows you to calculate the risk and return metrics to answer the following questions. a.) What are the expected returns for each asset class? b.) What are the standard deviations of returns for each asset class? c.) Set up an appropriate table that shows the correlation coefficients between all the pairs of asset classes in this study. Correlation Coefficient Matrix Bonds Domestic Equities International Equities Residential Property Commercial Property Cold Silver Crude Ol 1 1 1 1 1 Bonds Domestic Equities International Iquities Residential Property Commercial Property Gold Silver Crude Oil 1 1 1 Question 2 Risk and Return An analyst has undertaken historical studies of the returns of various asset classes under different economic conditions. These are her findings: Scenario Probability 1 2 3 Cash 1.50% 1.60% 0.30 -50% Expected Returns p.) Bonds Domestic Equities International Equities Residential Property Commercial Property 4.2% 27.0T 22.00% 9.00% 11.00 1.A. 15.00 150 7.00% 9.00 1.57% 7.00 3.00% 11.00% 0.7% -12 .. -14.00% 13.00 -18.00% Gold Silver Crude Ou 2.00% 9.TK 15.07% 5.00% 2.TK 6.OKT. 7.00% 4.07% 12.00% -11.00% -9.00 The returns data are collected from the last 10 years. Let x, y and z be the following: x = 10% if your first letter of your first name is A-H, 15% if I-P and 20% if Q-Z (my name starts with R= 20%) y = 40% if your first letter of your surname is A-H, 35% if I-P and 30% if Q-Z (my surname starts with A = 40%) z = 25% if your year of birth is an odd number and 20% if it is even. (even = 20%) Set up an appropriate spreadsheet that allows you to calculate the risk and return metrics to answer the following questions. a.) What are the expected returns for each asset class? b.) What are the standard deviations of returns for each asset class? c.) Set up an appropriate table that shows the correlation coefficients between all the pairs of asset classes in this study. Correlation Coefficient Matrix Bonds Domestic Equities International Equities Residential Property Commercial Property Cold Silver Crude Ol 1 1 1 1 1 Bonds Domestic Equities International Iquities Residential Property Commercial Property Gold Silver Crude Oil 1 1 1
