You have been given the expected return data shown in the first table on three assets—F, G, and H—over the period 2018-2021 Year Asset F Asset G Asset H 2019 5 12 12 2020 10 9 7 2021 13 21 4 2022 6.5 6 10.5 Using these assets, you have isolated the three investment alternatives shown in the following table. Alternative Investment 1 100% of asset G 2 40% of asset F and 60% of asset G 3 50% of asset F and 50% of asset H Calculate the expected return over the 4-year period for each of the three alternative Calculate the standard deviation of returns over the 4-year period for each of the three alternatives. Use your findings in parts a and b to calculate the coefficient of variation for each of the three alternatives. On the basis of your findings, which of the three investment alternatives do you recommend? Why?
You have been given the expected return data shown in the first table on three assets—F, G, and H—over the period 2018-2021 Year Asset F Asset G Asset H 2019 5 12 12 2020 10 9 7 2021 13 21 4 2022 6.5 6 10.5 Using these assets, you have isolated the three investment alternatives shown in the following table. Alternative Investment 1 100% of asset G 2 40% of asset F and 60% of asset G 3 50% of asset F and 50% of asset H Calculate the expected return over the 4-year period for each of the three alternative Calculate the standard deviation of returns over the 4-year period for each of the three alternatives. Use your findings in parts a and b to calculate the coefficient of variation for each of the three alternatives. On the basis of your findings, which of the three investment alternatives do you recommend? Why?
Survey of Accounting (Accounting I)
8th Edition
ISBN:9781305961883
Author:Carl Warren
Publisher:Carl Warren
Chapter15: Capital Investment Analysis
Section: Chapter Questions
Problem 15.3.1P
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- You have been given the expected return data shown in the first table on three assets—F, G, and H—over the period 2018-2021
Year |
Asset F |
Asset G |
Asset H |
2019 |
5 |
12 |
12 |
2020 |
10 |
9 |
7 |
2021 |
13 |
21 |
4 |
2022 |
6.5 |
6 |
10.5 |
Using these assets, you have isolated the three investment alternatives shown in the following table.
Alternative |
Investment |
|
|
1 |
100% of asset G |
2 |
40% of asset F and 60% of asset G |
3 |
50% of asset F and 50% of asset H |
|
|
- Calculate the expected return over the 4-year period for each of the three alternative
- Calculate the standard deviation of returns over the 4-year period for each of the three alternatives.
- Use your findings in parts a and b to calculate the coefficient of variation for each of the three alternatives.
- On the basis of your findings, which of the three investment alternatives do you recommend? Why?
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