Question
The following information indicates percentage returns for stocks L and M over a 6-year period: Year Stock L Returns Stock M Returns 1 14.66% 20.97%
The following information indicates percentage returns for stocks L and M over a 6-year period:
Year | Stock L Returns | Stock M Returns |
1 | 14.66% | 20.97% |
2 | 14.49% | 18.98% |
3 | 16.55% | 16.74% |
4 | 17.23% | 14.85% |
5 | 17.6% | 12.48% |
6 | 19.96% | 10.31% |
In combining [LM] in a single portfolio, stock M would receive 60% of capital funds.
Furthermore, the information below reflects percentage returns for assets F, G, and H over a 4-year period, with asset F being the base instrument:
Year | Asset F Returns | Asset G Returns | Asset H Returns |
1 | 16.09% | 17.2% | 14.01% |
2 | 17.17% | 16.42% | 15.46% |
3 | 18.47% | 15.03% | 16.42% |
4 | 19.05% | 14.39% | 17.15% |
Using these assets, you have a choice of either combining [FG] or [FH] in a single portfolio, on an equally-weighted basis.
Required: Calculate the absolute percentage difference in the coefficient of variation (CV) between the stock portfolio [LM] and the portfolio which outlines the optimal combination of assets.
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