how would you comments on the effects of this portfolio diversification: Excel P
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how would you comments on the effects of this portfolio diversification:
Excel Project1_Week 5 [Compatibility Mode] - Excel HOMEINSERT PAGE LAYOUT FORMULAS DATA REVIEW VIEW Gulley, Tamara Cut AutoSum A Calibri 12 e Wrap Text General Fill Sort & Find & Filter-Select- Paste B 1 u , $, % , 58.8 Conditional Format as Ce Insert Delete Format Formatting Table" Styles ___ E E-Merge & Center Format Painter Clear Font Number Cells Editing Clipboard SUBSCRIPTION EXPIRED UPDATES AVAILABLE Alignment Styles To keep using Excel without interruption, please reactivate now Reactivate Updates for Office are ready to be installed, but first we need to close some apps. Update now C63 63 64 65 1. Arithmetic Average Return 66 2. Geometric Average Return 67 3. Standard Deviation of Returns 68 4. Coefficion of Variation-standard deviati 69 5. Rate 70 71 72 73 100% Bonds 10/90 20/80 30/70 40/60 50/50 60/40 70/30 80/20 90/10 100% Stocks&P; 500 0.0720.0785 0.085205 0.092114 0.099068 0.106227 0.113568 0.120955 0.128591 0.1362727 0.064388955 0.070908 0.077217 0.083354 0.089326 0.0949510.100409 0.105662 0.110556 0.115337 0.1197489 5.290401276 4.9258695.325476 6.35041 7.742219 9.359522 11.08202 12.87759 14.72992 16.60124 18.503304 80.57378199 68.41485 67.84046 74.53136 84.05074 94.47556 104.3237 113.3908 121.7807129.1012 135.78142 11.975% 0.119227273 0.104017159 17.63648258 147.9232241 10.402% 0.065659091 6.439% 7.091% 7.722% 8.335% 8.933% 9.495% 10.041% 10.566% 11.056% 11.534% 75 76 ReturnsData.txt GrowthFactorPerInvestments Investmentvalues! READY + 10096 10:41 PM 6/4/2016 DesktopExplanation / Answer
here we can see that when the entire portfolio consists of 100% of Bond then return is the lowest, st. deviation that is variation is also low but the risk for getting this return is on bit higher side, we can assume that Bond might be a corporate bond, the lowest risk in the portfolio is when there is 80% stock and 20% Bonds but return is also bit lower on the other side deviation in return is also low. The highest return that is geometric return when entire fund is invested in stock, but it also has the second highest risk. When funds are invested in S&P 500 then risk is highest, though return is second highest but the deviation of the return is also one of the highest. When enntire fund is invested in 50% in Bonds and 50% in stock then return is close to 9.5%, risk in the stock, variation in the stock is also median. If an investor is risk seeker, who has the risk apetite can go for investing entire fund in 100% stock, on the other hand if investor is risk averse, can go for investing in 20% bond and 80% stock this has the least risk and relative return is greater.
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