Expected return, standard deviation of returns
You have been given the return data shown in the first table on three assets?F, G, and H?over the period 2007-2010.
Year Asset F Asset G Asset H
2007 17% 18% 15%
2008 18 17 16
2009 19 16 17
2010 20 15 18
Using these assets, you have isolated the three investment alternatives shown in the following table:
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
1. Calculate the expected return over the 4-year period for each of the three alternatives.
2. Calculate the standard deviation of returns over the 4-year period for each of the three alternatives.
3. Use your findings in parts a and b to calculate the coefficient of variation for each of the three alternatives.
4. On the basis of your findings, which of the three investment alternatives do you recommend? Why?