Assume you are considering a portfolio containing two assets, L and M. Asset L will represent 36% of the dollar value of the portfolio, and asset M will account for the other 64%. The projected returns over the next six years, 2018–2023, for each of these assets are summarized in the following table. *huge thumbs up for correct answers*

	Projected Return (%)
Year	Asset L	Asset M
2018	15%	21%
2019	14%	17%
2020	16%	16%
2021	16%	14%
2022	17%	13%
2023	18%	9%

a.Use an Excel spreadsheet to calculate the projected portfolio return, r_p, for each of the six years.

b. The average expected portfolio? return, r_p, over the 6-year period is (blank) %

c. The standard deviation of expected portfolio returns over the 6-year period is (blank) %

d. How would you characterize the correlation of returns of the two assets L and? M? (neg. pos. or un-correlated)

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

A. By combining these two negatively correlated? assets, the overall portfolio risk is increased.

B. By combining these two positively correlated? assets, the overall portfolio risk is reduced.

C. By combining these two negatively correlated? assets, the overall portfolio risk is reduced.

D.By combining these two negatively correlated? assets, the overall portfolio risk is eliminated.

Answer rating: 100% (QA)

We can easily calculate the projected portfolio return rp for each year using a spreadsheet Heres ho... View the full answer