In: Finance
You have been given the expected return data shown in the first table on three
assetslong dash—F,
G, and
Hlong dash—over
the period 2016-2019:
lick on the icon located on the top-right corner of the data table below in order to copy its contents into a spreadsheet.)
Expected Return |
|||||||
Year |
Asset F |
Asset G |
Asset H |
||||
2016 |
11% |
12% |
|
9% |
|
||
2017 |
12% |
11% |
10% |
||||
2018 |
13% |
10% |
11% |
||||
2019 |
14% |
99% |
12% |
.
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?