Assume you are considering a portfolio containing assets 1 and 2. Asset 1 will represent 55% of the dollar value of the portfolio, and asset 2 will account for the other 45%. The projected returns over the next six years, 2021–2026, for each of these assets are summarized in the following table.

a. Use an Excel spreadsheet to calculate the projected portfolio return, r_p, for each of the six years.
b. Use an Excel spreadsheet to calculate the average portfolio return, r_p, over the six year period.
c. Use an Excel spreadsheet to calculate the standard deviation of projected portfolio returns, s_p, over the six-year period.
d. How would you characterize the correlation of returns of assets 1 and 2?
e. Discuss any benefits of diversification achieved through creation of the portfolio.

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Year 2021 2022 2023 2024 2025 2026 Projected Return Asset 1 -8% 13 25 2 -10 32 Asset 2 32% 6 -8 19 34 -17