You have been asked for your advice in selecting a portfolio of assets and have been...

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Finance

You have been asked for your advice in selecting a portfolio ofassets 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—oneconsisting of assets A and B and the other consisting of assets Aand C—by investing equal proportions (50%) in each of the twocomponent assets.
a. What is the expected return for each asset over the 3-yearperiod?
b. What is the standard deviation for each asset’s return?
c. What is the expected return for each of the twoportfolios?
d. How would you characterize the correlations of returns of thetwo assets making up each of the two portfolios identified in partc?
e. What is the standard deviation for each portfolio?
f. Which portfolio do you recommend? Why?
(please show step by step really need help, thank you)

Answer & Explanation Solved by verified expert

4.5 Ratings (677 Votes)

Firstwe will prepare table containing all required dataa Expected Returnwewill consider average return as expected returnExpected See Answer

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You have been asked for your advice in selecting a portfolio ofassets and have been given the following data:Expected returnYear Asset A Assest B Assest C2019 12% 16% 12%2020 14% 14% 14%2021 16% 12% 16%You have been told that you can create two portfolios—oneconsisting of assets A and B and the other consisting of assets Aand C—by investing equal proportions (50%) in each of the twocomponent assets.a. What is the expected return for each asset over the 3-yearperiod?b. What is the standard deviation for each asset’s return?c. What is the expected return for each of the twoportfolios?d. How would you characterize the correlations of returns of thetwo assets making up each of the two portfolios identified in partc?e. What is the standard deviation for each portfolio?f. Which portfolio do you recommend? Why?(please show step by step really need help, thank you)