You have been asked for your advice in selecting a portfolio of assets and have been given the following data: Expected return Year Asset A Assest B Assest C 2019 12% 16% 12% 2020 14% 14% 14% 2021 16% 12% 16% You have been told that you can create two portfolios—one consisting of assets A and B and the other consisting of assets A and C—by investing equal proportions (50%) in each of the two component assets. a. What is the expected return for each asset over the 3-year period? b. What is the standard deviation for each asset’s return? c. What is the expected return for each of the two portfolios?
You have been asked for your advice in selecting a portfolio of assets and have been given the following data:
Expected return
Year Asset A Assest B Assest C
2019 12% 16% 12%
2020 14% 14% 14%
2021 16% 12% 16%
You have been told that you can create two portfolios—one consisting of assets A and B and the other consisting of assets A and C—by investing equal proportions (50%) in each of the two component assets.
a. What is the expected return for each asset over the 3-year period?
b. What is the standard deviation for each
c. What is the expected return for each of the two portfolios?
d. How would you characterize the correlations of returns of the two assets making up each of the two portfolios identified in part c?
e. What is the standard deviation for each portfolio?
f. Which portfolio do you recommend? Why?
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