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you have been given the expected return data shown in the first table on three assetslong dash—?F, ?G,...

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Finance

you have been given the expected return data shown in the firsttable on three

assetslong dash—?F,

?G, and

H long dash—over

the period? 2016-2019:

Expected Return

Year

Asset F

Asset G

Asset H

2016

16?%

17?%

???

14?%

???

2017

17?%

16?%

15?%

2018

18?%

15?%

16?%

2019

19?%

14?%

17?%

Using these? assets, you have isolated the three investmentalternatives shown in the following? table

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

?Calculate the standard deviation of returns over the? 4-yearperiod for each of the three alternatives

Answer & Explanation Solved by verified expert
4.3 Ratings (516 Votes)

Standard Deviation
Year Asset F Deviation Deviation2
2016 16 -1.5 2.25
2017 17 -0.5 0.25
2018 18 0.5 0.25
2019 19 1.5 2.25
70 5
Average Expected Return= 17.5
Standard Deviation =SQRT(Deviation)2
2.236068
Year Asset G Deviation Deviation
2016 17 1.5 2.25
2017 16 0.5 0.25
2018 15 -0.5 0.25
2019 14 -1.5 2.25
62 5
Average Expected Return= 15.5
Standard Deviation 2.236068
Year Asset H Deviation Deviation
2016 14 -1.5 2.25
2017 15 -0.5 0.25
2018 16 0.5 0.25
2019 17 1.5 2.25
62 5
Average Expected Return= 15.5
Standard Deviation 2.236068
Alternative 1
?100% of asset F
Standard Deviation= Standard Deviation of F
2.236068
Alternative 2
?50% of asset F and? 50% of asset G
Standard Deviation= Standard Deviation of F* weights of F+ Standard Deviation of G * Weights of G
2.236068
Alternative 3
?50% of asset H and? 50% of asset G
Standard Deviation= Standard Deviation of H* weights of H+ Standard Deviation of G * Weights of G
2.236068

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Transcribed Image Text

you have been given the expected return data shown in the firsttable on threeassetslong dash—?F,?G, andH long dash—overthe period? 2016-2019:Expected ReturnYearAsset FAsset GAsset H201616?%17?%???14?%???201717?%16?%15?%201818?%15?%16?%201919?%14?%17?%Using these? assets, you have isolated the three investmentalternatives shown in the following? tableAlternativeInvestment1?100% of asset F2?50% of asset F and? 50% of asset G3?50% of asset F and? 50% of asset H?Calculate the standard deviation of returns over the? 4-yearperiod for each of the three alternatives

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