Problem: You have been given the return data shown in the first table on three countries—China, India, and South Korea—over the period 2007–2010.
|
|
Expected return
|
|
Year
|
China
|
India
|
South Korea
|
|
2009
|
16%
|
17%
|
14%
|
|
2010
|
17%
|
16%
|
15%
|
|
2011
|
18%
|
15%
|
16%
|
|
2012
|
19%
|
14%
|
17%
|
Using these countries, you have isolated the three investment alternatives shown in the following table:
|
Alternative Investment
|
|
1
|
100% of China
|
|
2
|
50% of China and 50% or India
|
|
3
|
50% of China and 50% of South Korea
|
Q1. Calculate the expected return over the 4-year period for each of the three alternatives.
Q2. Calculate the standard deviation of returns over the 4-year period for each of the three alternatives.
Q3. Use your findings in parts a and b to calculate the coefficient of variation for each of the three alternatives.
Q4. On the basis of your findings, which of the three investment alternatives do you recommend? Why?