In: Finance
Coleman is considering investing his funds in two assets. His assessment of each investment is as follows:
Item |
Asset 1 |
Asset 2 |
Expected Return (%) |
15 |
15 |
Standard Deviation (%) |
10 |
25 |
Required:
Please refer to below spreadsheet for calculation and answer. Cell reference also provided.
Cell reference -
Expected return of Asset 1 , Asset 2 and all portfolio combination at different correlation coefficient is same i.e 15%, Thus, an investment with lowest standard deviation would be better investment.
Portfolio in (d), has lowest standard deviation and same expected return thus it is a better choice.