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Using these assets, you have isolated the three investment alternatives shown in the following table: Data table a. Calculate the average return over the 4-year
Using these assets, you have isolated the three investment alternatives shown in the following table: Data table a. Calculate the average return over the 4-year period for each of the three alternatives. b. Calculate the standard deviation of returns over the 4-year period for each of the three altematives. IClick on the ioon here Fin in order to copy the contents of the daty table below c. Use your findings in parts a and b to calculate the coefficient of variation for each of the three alternatives. d. On the basis of your findings, which of the three investment alternatives do you think performed better over this period? Why? 10. (Round to two decimal places.) The standard deviation of returns over the 4-year period for alternative 2 is =0 \%. (Round to two decimal places.) The standard deviation of returns over the 4-year period for altemative 3 is \%. (Round to two decimal places.) c. The coefficient of variation for alternative 1 is (Round to three decimal places.) The coefficient of variation for alternative 2 is 0 . (Round to three decimal places.) The coefficient of variation for alternative 3 is (Round to three decimal places.) d. On the basis of your findings, which of the three investment alternatives do you recommend? Why? Alternative 1 posted the highest return but Alternative 2 the lowest volatility (risk). When thinking about performance, it is instructive to ask how a hypothetical investor might view these alternatives. She would first note Alternative 2 is clearly preferable to Alternative 3 because it offers the same expected retum but no volatility in returns. Now, as between Alternatives 1 and 2 , Alternative 1 offers a higher expected retum but also has more volatile returns. Without knowing an investor's risk tolerance, it is not possible to say whether Alternative 1 or 2 is "best." Is the previous statement True or False? (Select the best answer from the drop-down menu.)
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