Score: 0 of 10 pts 7 of 102 complete) HW Score: 20%, 20 of 100 pts P8-14 (simila

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Score: 0 of 10 pts 7 of 102 complete) HW Score: 20%, 20 of 100 pts P8-14 (similar to) Question Help Portfolio analysis You have been given the expected return data shown in the first table on three assets-F, G, and H-ver the period 2016-2019: Using these assets, you have isolated the three investment alternatives shown in the following table: a. Calculate the expected return over the 4-year period for each of the three alternatives. b. Calculate the standard deviation of returns over the 4-year period for each of the three altermatives. c. Use your findings in parts a and b to calculate the coefficient of variation for each of the three alternatives. d. On the basis of your findings, which of the three investment alternatives do you recommend? Why? a. The expected return over the 4-year period for alternative 1 %. Round to two decimal place Enter your answer in the answer box and then click Check Answer. Clear A Check Answer remaining

Explanation / Answer

Alternative 1 Alternative 2- Alternative 3- 100% of Asset F 50% Asset F & 50% Asset G 50% Asset F & 50% Asset H Asset F (R-ER)^2 Asset F Asset G R=50%*r(F)+50%*r(G) 50%*(R(F)-ER)^2+50%*(r(G)-ER)^2 Asset F Asset G R=50%*r(F)+50%*r(H) 50%*(R(F)-ER)^2+50%*(r(H)-ER)^2 Year (r-0.195)^2 Year ER=0.185 Year ER=0.185 2016 0.18 0.000225 2016 0.18 0.19 0.185 0.000025 2016 0.18 0.16 0.17 0.000325 2017 0.19 0.000025 2017 0.19 0.18 0.185 0.000025 2017 0.19 0.17 0.18 0.000125 2018 0.2 0.000025 2018 0.2 0.17 0.185 0.000225 2018 0.2 0.18 0.19 0.000125 2019 0.21 0.000225 2019 0.21 0.16 0.185 0.000625 2019 0.21 0.19 0.2 0.000325 Sum 0.78 0.0005 Sum 0.74 0.0009 Sum 0.74 0.0009 Average/Expected return= 0.78/4= 0.74/4= 0.74/4= 0.195 0.185 0.185 ie.   ER= 19.5% 18.5% 18.5% Variance= Sum of squared difference from the mean 0.0005 0.0009 0.0009 Std. Devn.=Sq.rt of Variance= 2.24% 3.00% 3.00% Coefficient of variation=Std.devn./Mean 2.24%/19.5%= 3%/18.5%= 3%/18.5%= 11.49% 16.22% 16.22% Alternative 1 is recommended as its co-efficient of variation is the least. Higher coefficient of variation mean greater the level of dispersion around the mean. The lower the value of the coefficient of variation, the better.

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