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
a. Calculate the expected 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 alternatives.
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 recommend? Why?