Assume you are considering a portfolio containing two assets, Land M ...

Assume you are considering a portfolio containing twoâ€‹ assets, L and M. Asset L will represent...

60.1K

Verified Solution

Question

Finance

Assume you are considering a portfolio containing twoâ€‹ assets, Land M. Asset L will represent 44 % of the dollar value of theâ€‹portfolio, and asset M will account for the other 56 %. Theprojected returns over the next 6â€‹ years, 2018-2023â€‹, for each ofthese assets are summarized in the followingâ€‹ table: a. Calculatethe projected portfolioâ€‹ return, r pâ€‹, for each of the 6 years. b.Calculate the average expected portfolioâ€‹ return, r overbarSubscript pâ€‹, over theâ€‹ 6-year period. c. Calculate the standarddeviation of expected portfolioâ€‹ returns, s Subscript pâ€‹, over theâ€‹6-year period. d. How would you characterize the correlation ofreturns of the two assets L andâ€‹ M? e. Discuss any benefits ofdiversification achieved through creation of the portfolio.
Projected Return
Year Asset L Asset M
2018 13% 21%
2019 15% 17%
2020 16% 16%
2021 18% 14%
2022 17% 13%
2023 19% 11%

Answer & Explanation Solved by verified expert

4.2 Ratings (1007 Votes)

1 Return for each year weight of asset L return of asset L weight of asset M return of asset M Year Asset L Asset M 2018 13 21 0441305621 1748 2019 15 17 0441505617 1612 2020 16 16 0441605616 16 2021 18 14 0441805614 1576 2022 17 13 0441705613 1476 2023 19 11 See Answer

Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:

Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!

Become a Member

	Projected Return
Year	Asset L	Asset M
2018	13%	21%
2019	15%	17%
2020	16%	16%
2021	18%	14%
2022	17%	13%
2023	19%	11%