Question

In: Finance

You have been given the expected return data shown in the first table on three assets-A,B...

You have been given the expected return data shown in the first table on three assets-A,B and C- over the period 2021-2024.

Expected return

Year Asset A Asset B Asset C
2021 6% 10% 4%
2022 8% 8% 6%
2023 10% 6% 8%
2024 12% 4% 10%

Using these assets, you have isolated the three investment alternatives shown in the following table:

Alternative Investment
1 100% of asset A
2 55% of asset A and 45% of asset B
3 55% of asset A and 45% of asset C


a.) Calculate the expected return over the 4-year period for each of the 3 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 & 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?

Solutions

Expert Solution

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