Assignment:
Asset Class Geometric Mean (%) Standard Deviation (%)
Large Co. Stocks 12.83% 9.75%
Small Co. Stocks 14.87% 18.55%
Government Bonds 4.10% 2.58%
Corporate Bonds 4.81% 2.36%
1) Based on the following information, calculate the risk of each asset class in relation to its annual historic return.
2) Run the same calculations except this time take into account a 2% inflation factor that will affect the real return on each asset class.