Problem 9-27 Asset Allocation (LG9-2, LG9-5)

Annual and Average Returns for Stocks, Bonds, and T-Bills, 1950 to 2017

			Stocks			Long-Term Treasury Bonds			T-bills
1950 to 2017		Average		12.7	%		6.6	%		4.30	%
1950 to 1959		Average		20.9			0.0			2.00
1960 to 1969		Average		8.7			1.6			4.00
1970 to 1979		Average		7.5			5.7			6.30
1980 to 1989		Average		18.2			13.5			8.90
1990 to 1999		Average		19.0			9.5			4.90
2000 to 2009		Average		0.9			8.0			2.70
2010		Annual Return		15.1			9.4			0.01
2011		Annual Return		2.1			29.9			0.02
2012		Annual Return		16.0			3.6			0.02
2013		Annual Return		32.4			12.7			0.07
2014		Annual Return		13.7			25.1			0.05
2015		Annual Return		1.4			1.2			0.21
2016		Annual Return		12.0			1.2			0.51
2017		Annual Return		21.8			8.4			1.39
2010 to 2017		Average		14.3			8.0			0.29

You have a portfolio with an asset allocation of 55 percent stocks, 30 percent long-term Treasury bonds, and 15 percent T-bills. Use these weights and the returns given in the above table to compute the return of the portfolio in the year 2010 and each year since. Then compute the average annual return and standard deviation of the portfolio. (Do not round intermediate calculations. Round your answers to 2 decimal places.)

2010

2011

2012

2013

2014

2015

2016

2017

Average

Standard deviation