Math Solutions

[Step-by-Step] Portfolio analysis You have been given the return data shown in the first table on three assets—F, G, and H—over the period 2007-2010. Expected

Question: Portfolio analysis You have been given the return data shown in the first table on three assets—F, G, and H—over the period 2007–2010.

Expected return
Year Asset F Asset G Asset H
2007 16% 17% 14%
2008 17 16 15
2009 18 15 16
2010 19 14 17

Using these assets, you have isolated the three investment alternatives shown in the following table:

Alternative Investment
1 100% of asset F
2 50% of asset F and 50% of asset G
3 50% of asset F and 50% of asset H
  1. Calculate the expected return over the 4-year period for each of the three alternatives.
  2. Calculate the standard deviation of returns over the 4-year period for each of the three alternatives.
  3. Use your findings in parts a and b to calculate the coefficient of variation for each of the three alternatives.
  4. On the basis of your findings, which of the three investment alternatives do you recommend? Why?

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