Question: 513 Portfolio analysis You have been given the return data shown in the first table on three assetsF, G, and Hover the period 20042007. a.

5–13 Portfolio analysis You have been given the return data shown in the first table on three assets—F, G, and H—over the period 2004–2007.

Expected return Year Asset F Asset G Asset H 2004 16% 17%

a. Calculate the expected portfolio return, kp, for each of the 6 years.

b. Calculate the expected value of portfolio returns, kp, over the 6-year period.

c. Calculate the standard deviation of expected portfolio returns, kp , over the 6-year period.

d. How would you characterize the correlation of returns of the two assets L and M?

e. Discuss any benefits of diversification achieved through creation of the portfolio.

Expected return Year Asset F Asset G Asset H 2004 16% 17% 14% 2005 17 16 15 2006 18 15 16 2007 19 14 17

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