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Assume you are considering a portfolio containing two​ assets, L and M. Asset L will represent...

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Finance

Assume you are considering a portfolio containing two​ assets, Land M. Asset L will represent 56 % of the dollar value of the​portfolio, and asset M will account for the other 44 %. Assume thatthe portfolio is rebalanced at the end of each year. The expectedreturns over the next 6​ years, 2018dash2023​, for each of theseassets are summarized in the following​ table:

Projected Return
YearAsset LAsset M
201814%21%
201914%17%
202016%17%
202118%13%
202216%12%
202318%10%

a. Calculate the expected portfolio​ return, r Subscript p​, foreach of the 6 years. b. Calculate the average expected portfolio​return, r overbar Subscript p​, over the​ 6-year period. c.Calculate the standard deviation of expected portfolio​ returns, sSubscript p​, over the​ 6-year period. d. Assume that asset Lrepresents 44 % of the portfolio and asset M 56 %. Calculate theaverage expected return and standard deviation of expectedportfolio returns over the​ 6-year period. e. Compare your answersto the answers from parts b and c.

Answer & Explanation Solved by verified expert
4.3 Ratings (800 Votes)
a Calculate the expected portfolio return as    See Answer
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