Question

	Projected Return
Year	Asset A	Asset B	Asset C
2018	10%	15%	11%
2019	12%	13%	13%
2020	14%	11%	15%

You have been asked for your advice in selecting a portfolio of assets and have been supplied with the following​ data: LOADING.... You have been told that you can create two portfolioslong dashone consisting of assets A and B and the other consisting of assets A and Clong dashby investing equal proportions ​(50 %​) in each of the two component assets. a. What is the average expected​ return, r overbar​, for each asset over the​ 3-year period? b. What is the standard​ deviation, s​, for each​ asset's expected​ return? c. What is the average expected​ return, r overbar Subscript p​, for each of the​ portfolios? d. How would you characterize the correlations of returns of the two assets making up each of the portfolios identified in part c​? e. What is the standard deviation of expected​ returns, s Subscript p comma for each​ portfolio? f. What would happen if you constructed a portfolio consisting of assets​ A, B, and​ C, equally​ weighted? Would this reduce risk or enhance​ return?

Answer 1

Please refer to below spreadsheet for calculation and answer. Cell reference also provided.

Cell reference -

Hope this will help, please do comment if you need any further explanation. Your feedback would be appreciated.