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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 Alternative Investment 100% of asset F 50% of asset F and 50% of asset G 50% of asset F and 50% of asset H 3

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 Alternative Investment 100% of asset F 50% of asset F and 50% of asset G 50% of asset F and 50% of asset H 3

Essentials Of Investments
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
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You have been given the expected return data shown in the first table on three assets—F, G, and H—over the period 2016–2019.

Using these assets, you have isolated the three investment alternatives shown in the following table.

  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?
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
Transcribed Image Text: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
Alternative Investment 100% of asset F 50% of asset F and 50% of asset G 50% of asset F and 50% of asset H 3
Transcribed Image Text:Alternative Investment 100% of asset F 50% of asset F and 50% of asset G 50% of asset F and 50% of asset H 3
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