You have been requested to offer your advice in selecting a portfolio of assets with the following set of information Expected Return Year Asset A Asset B Asset C 1 12 16 12 2 14 14 14 3 16 12 16 You are requested to create two portfolios One consisting of A and B and the other consisting of assets A and C investing equal proportions (50 ) in each of the two component assets Required What is the expected return for each asset over the 3 year period What is the standard deviation for each asset's return What is the expected return for each of the two portfolios Describe the correlation of returns for the two portfolios in item 3 What is the standard deviation for each portfolio What portfolio would you recommend and why

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Question: You have been requested to offer your advice in selecting a portfolio of assets with the following set of information: Expected Return Year Asset A

You have been requested to offer your advice in selecting a portfolio of assets with the following set of information:

Expected Return

Year Asset A Asset B Asset C

1 12% 16% 12%

2 14% 14% 14%

3 16% 12% 16%

You are requested to create two portfolios - One consisting of A and B and the other consisting of assets A and C - investing equal proportions (50%) in each of the two component assets.

Required:

What is the expected return for each asset over the 3-year period?
What is the standard deviation for each asset's return?
What is the expected return for each of the two portfolios?
Describe the correlation of returns for the two portfolios in item 3?
What is the standard deviation for each portfolio?
What portfolio would you recommend and why?

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