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.
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:
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?
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