Question

Assume you are considering a portfolio containing two assets, L and M Asset L will represent 37% o the dollar value of the portfolio and asset M will account for the other 63%. The pro ected returns over he next 6 years, 2018-2023, for each of these assets are summarized in the following table: a. Calculate the projected portfollo return, rp for each of the 6 years. b. Calculate the average expected portolio return, rp, over the 6-year period. c. Calculate the standard deviation of expected portolio returns, Spi over the 6-year period. d. How would you characterize the correlation of returms of the two assets L and M? e. Discuss any benefits of diversification achieved through creation of the portfolio. Data Table □%. (Round to two decimal places.) a. The projected portfolio return, rp, for 2018 is The projected portfolio return, r" for 2019 is %. (Round to two decimal places.) The projected portfolio retum, rp for 2020 is The projected portfolio return, ', for 2021 is [ %, (Round to two decimal places.) The projected portfolio return,。. for 2022 is %. (Round to two decimal places.) The projected portfolio retum, ,, for 2023 is %. (Round to two decimal places.) b. The average expected portfolio retum. over the 6 year period is c. The standard deviation of expected portfolio retums, sp, over the 6-year period is %. (Round to three decimal places.) d. How would you characterize the correlation of returns of the two assets L and M? The assets are e. Discuss any benefits of diversification achieved through creation of the portfolio. (Select the best choice below.) (Click on the icon located on the top-right comer of the data table below in order to copy its contents into a spreadsheet.) %. (Round to two decimal places.) Projected Return Year 2018 2019 2020 2021 2022 2023 Asset L 15% 14% 17% 16% 17% 19% Asset M 19% 19% 16% 14% 12% 9% (Round to two decimal places.) Print Done Vcorrelated. (Sclect from the drop-down menu.)

Answer 1

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