you have been given the expected return data shown in the first table on three assetslong dash—?F, ?G,...

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Finance

you have been given the expected return data shown in the firsttable on three
assetslong dash—?F,
?G, and
H long dash—over
the period? 2016-2019:
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?%
Using these? assets, you have isolated the three investmentalternatives shown in the following? table
Alternative
Investment
1
?100% of asset F
2
?50% of asset F and? 50% of asset G
3
?50% of asset F and? 50% of asset H
?Calculate the standard deviation of returns over the? 4-yearperiod for each of the three alternatives

Answer & Explanation Solved by verified expert

4.3 Ratings (516 Votes)

	Standard Deviation

Year	Asset F	Deviation	Deviation²
2016	16	-1.5	2.25
2017	17	-0.5	0.25
2018	18	0.5	0.25
2019	19	1.5	2.25
	70		5

Average Expected Return=			17.5

	Standard Deviation		=SQRT(Deviation)²
			2.236068

Year	Asset G	Deviation	Deviation
2016	17	1.5	2.25
2017	16	0.5	0.25
2018	15	-0.5	0.25
2019	14	-1.5	2.25
	62		5

Average Expected Return=			15.5

	Standard Deviation		2.236068



Year	Asset H	Deviation	Deviation
2016	14	-1.5	2.25
2017	15	-0.5	0.25
2018	16	0.5	0.25
2019	17	1.5	2.25
	62		5

Average Expected Return=			15.5

	Standard Deviation		2.236068

Alternative 1
?100% of asset F
Standard Deviation=		Standard Deviation of F
		2.236068


Alternative 2
?50% of asset F and? 50% of asset G
Standard Deviation=		Standard Deviation of F* weights of F+ Standard Deviation of G * Weights of G
		2.236068


Alternative 3
?50% of asset H and? 50% of asset G
Standard Deviation=		Standard Deviation of H* weights of H+ Standard Deviation of G * Weights of G
		2.236068

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Transcribed Image Text

you have been given the expected return data shown in the firsttable on threeassetslong dash—?F,?G, andH long dash—overthe period? 2016-2019:Expected ReturnYearAsset FAsset GAsset H201616?%17?%???14?%???201717?%16?%15?%201818?%15?%16?%201919?%14?%17?%Using these? assets, you have isolated the three investmentalternatives shown in the following? tableAlternativeInvestment1?100% of asset F2?50% of asset F and? 50% of asset G3?50% of asset F and? 50% of asset H?Calculate the standard deviation of returns over the? 4-yearperiod for each of the three alternatives

	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
1		?100% of asset F
2		?50% of asset F and? 50% of asset G
3		?50% of asset F and? 50% of asset H