Question
You have been given the expected return data shown in the first table on three assetsF, G, and Hover the period 2018-2021 Year Asset F
You have been given the expected return data shown in the first table on three assetsF, G, and Hover the period 2018-2021
Year | Asset F | Asset G | Asset H |
2018 | 7 | 12 | 12 |
2019 | 10 | 9 | 9 |
2020 | 15 | 21 | 4 |
2021 | 6.5 | 6 | 12.5 |
Using these assets, you have isolated the three investment alternatives shown in the following table.
Alternative | Investment |
|
|
1 | 100% of asset F |
2 | 35% of asset F and 65% of asset G |
3 | 50% of asset F and 50% of asset H |
|
|
Calculate the expected return over the 4-year period for each of the three alternative
Calculate the standard deviation of returns over the 4-year period for each of the three alternatives.
Use your findings in parts a and b to calculate the coefficient of variation for each of the three alternatives.
On the basis of your findings, which of the three investment alternatives do you recommend? Why?
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