Problem: 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
|
17%
|
18%
|
15%
|
|
2008
|
18
|
17
|
16
|
|
2009
|
19
|
16
|
17
|
|
2010
|
20
|
15
|
18
|
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
Question 1. Calculate the expected return over the 4-year period for each of the three alternatives.
Question 2. Calculate the standard deviation of returns over the 4-year period for each of the three alternatives.
Question 3. Use your findings in parts a and b to calculate the coefficient of variation for each of the three alternatives.
Question 4. On the basis of your findings, which of the three investment alternatives do you recommend? Why?