Calculate the portfolio return over the four-year period


Question: You have been given the following return data on three assets-F, G, and H-over the period 2018-2021.

                          Expected Return

Year       Asset F      Asset G       Asset H

2018        16%            17%           14%

2019        17%            16%           15%

2020        18%            15%           16%

2021        19%            14%           17%

Using these assets, you have isolated three investment alternatives:

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 portfolio return over the four-year period for each of the three alternatives.

b. Calculate the standard deviation of returns over the four-year period for each of the three alternatives.

c. On the basis of your findings in parts a and b, which of the three investment alternatives would you recommend? Why?

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Accounting Basics: Calculate the portfolio return over the four-year period
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