w suppose that instead of having invested $25 in each asset, you originally invested $50 in

Asset 1 and $50 in Asset 4(with $0 invested elsewhere). Thereafter, every month you sell

everything you own in assets 1 and 4, and then immediately buy again the same assets

in equal

amounts

. What is the average annual return and annual standard deviation of your whole investment?

How much will your investment be worth at the end of the sample period?

5. Now suppose that instead of investing $50 in assets 1 and 4, you

short

$100 of asset 4 (i.e., you

borrow $100 of asset 4, agreeing to return the $100 plus the return in asset 4 at the end of the month.

Note that this is, moneywise, the same as borrowing some unit, say a share, of asset 4, and agree to

return that same unit a month later.) and use those $100 plus $100 of your own money to invest in

asset 1. Thereafter, every month you sell whatever you have in asset 1, pay for your short position

in asset 4, and proceed to short asset 4 again, and invest in asset 1 again, in a 2-to-1 ratio (for every

dollar you short asset 4, you invest two dollars in asset 1). What is the average annual return and

annual standard deviation of

your net investment (i.e.,

after

youve paid for your short position)?

How much will your investment be worth at the end of the sample period?