P5–13 Portfolio analysis You have been given the return data shown in the first table on three assets—F, G, and H—over the period 2007–2010.

Expected Return

Year Asset F Asset G Asset H

2007 16% 17% 14%

2008 17% 16% 15%

2009 18% 15% 16%

2010 19% 14% 17%

Using these assets, you have isolated the three investment alternatives 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

a. Calculate the expected return over the 4-year period for each of the three alternatives.

b. Calculate the standard deviation of returns over the 4-year period for each of the three alternatives.

c. Use your findings in parts a and b to calculate the coefficient of variation for each of the three alternatives.

d. On the basis of your findings, which of the three investment alternatives do you recommend? Why?

Expected Return

Year Asset F Asset G Asset H

2007 16% 17% 14%

2008 17% 16% 15%

2009 18% 15% 16%

2010 19% 14% 17%

Using these assets, you have isolated the three investment alternatives 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

a. Calculate the expected return over the 4-year period for each of the three alternatives.

b. Calculate the standard deviation of returns over the 4-year period for each of the three alternatives.

c. Use your findings in parts a and b to calculate the coefficient of variation for each of the three alternatives.

d. On the basis of your findings, which of the three investment alternatives do you recommend? Why?