Assume you are considering a portfolio containing Asset 1 and Asset 2. Asset 1 will represent 37% of the dollar value of the portfolio, and asset 2 will account for the other 63%. Assume that the portfolio is rebalanced at the end of each year. The expected returns over the next 6 years, 2021–2026, for each of these assets are summarized in the following table: Data table (Click on the icon here in order to copy the contents of the data table below into a spreadsheet.) Projected Return Year Asset L Asset M 2021 −9% 33% 2022 15% 5% 2023 26% −9% 2024 4% 18% 2025 −9% 33% 2026 33% −18% . a. Calculate the expected portfolio return, rp, for each of the 6 years. b. Calculate the average expected portfolio return, rp, over the 6-year period. c. Calculate the standard deviation of expected portfolio returns, sp, over the 6-year period. d. Assume that asset 1 represents 63% of the portfolio and asset 2 is 37%. Calculate the average expected return and standard deviation of expected portfolio returns over the 6-year period. e. Compare your answers in part d to the answers from parts b and c.
Assume you are considering a portfolio containing Asset 1 and Asset 2. Asset 1 will represent 37% of the dollar value of the portfolio, and asset 2 will account for the other 63%. Assume that the portfolio is rebalanced at the end of each year. The expected returns over the next 6 years, 2021–2026, for each of these assets are summarized in the following table: Data table (Click on the icon here in order to copy the contents of the data table below into a spreadsheet.) Projected Return Year Asset L Asset M 2021 −9% 33% 2022 15% 5% 2023 26% −9% 2024 4% 18% 2025 −9% 33% 2026 33% −18% . a. Calculate the expected portfolio return, rp, for each of the 6 years. b. Calculate the average expected portfolio return, rp, over the 6-year period. c. Calculate the standard deviation of expected portfolio returns, sp, over the 6-year period. d. Assume that asset 1 represents 63% of the portfolio and asset 2 is 37%. Calculate the average expected return and standard deviation of expected portfolio returns over the 6-year period. e. Compare your answers in part d to the answers from parts b and c.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
Related questions
Question
Assume you are considering a portfolio containing Asset 1 and Asset 2. Asset 1 will represent
.
37%
of the dollar value of the portfolio, and asset 2 will account for the other
63%.
Assume that the portfolio is rebalanced at the end of each year. The expected returns over the next 6 years,
2021–2026,
for each of these assets are summarized in the following table:
Data table
(Click on the icon here
in order to copy the contents of the data table below into a spreadsheet.)
|
|
Projected Return
|
|||
|
Year
|
Asset L
|
Asset M
|
||
|
2021
|
−9%
|
|
33%
|
|
|
2022
|
15%
|
|
5%
|
|
|
2023
|
26%
|
|
−9%
|
|
|
2024
|
4%
|
|
18%
|
|
|
2025
|
−9%
|
|
33%
|
|
|
2026
|
33%
|
|
−18%
|
a. Calculate the expected portfolio return,
rp,
for each of the 6 years.b. Calculate the average expected portfolio return,
rp,
over the 6-year period.c. Calculate the standard deviation of expected portfolio returns,
sp,
over the 6-year period.d. Assume that asset 1 represents
63%
of the portfolio and asset 2 is
37%.
Calculate the average expected return and standard deviation of expected portfolio returns over the 6-year period.e. Compare your answers in part d to the answers from parts b and
c.
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