Question: Use the returns for the 3 assets below to answer the following questions. Period Asset 1 Asset 2 Asset 3 1 0.5% -2.9% -4.2% 2
Use the returns for the 3 assets below to answer the following questions.
| Period | Asset 1 | Asset 2 | Asset 3 |
| 1 | 0.5% | -2.9% | -4.2% |
| 2 | 9.5% | 22.4% | 2.8% |
| 3 | 5.5% | 22.1% | 4.3% |
| 4 | -7.9% | -2.3% | -3.6% |
| 5 | -2.3% | -5.9% | -8.8% |
| 6 | 5.2% | 12.8% | 9.0% |
| 7 | 3.6% | 4.9% | 14.7% |
| 8 | -4.8% | -4.9% | 13.0% |
| 9 | -0.9% | 8.5% | -1.3% |
| 10 | 14.4% | 12.0% | 26.9% |
| 11 | -1.9% | -17.9% | 3.5% |
2. Calculate the average return per period, the geometric (compounded) mean return, and the standard deviation of returns for each of the three assets.
3. Using your calculations in #2, compute the coefficient of variation for each of the three assets. Based on the coefficient of variation and the information in #2, which asset would you choose to invest in? Why?
4. Compute the average returns and standard deviation of the following portfolios over the 11 periods:
a. Portfolio 1: Invested equally in Asset 1 and Asset 2
b. Portfolio 2: Invested equally in Asset 1 and Asset 3
c. Portfolio 3: Invested equally in Asset 1, Asset 2, and Asset 3
d. In which one of the portfolios would you prefer to invest? Why?
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