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?