# Expected return, standard deviation of returns

You have been given the return data shown in the first table on three assets?F, G, and H?over the period 2007-2010.

Expected return

Year Asset F Asset G Asset H

2007 17% 18% 15%

2008 18 17 16

2009 19 16 17

2010 20 15 18

Using these assets, you have isolated the three investment alternatives shown in the following table:

Alternative Investment

1 100% of asset F

2 50% of asset F and 50% of asset G

3 50% of asset F and 50% of asset H

1. Calculate the expected return over the 4-year period for each of the three alternatives.

2. Calculate the standard deviation of returns over the 4-year period for each of the three alternatives.

3. Use your findings in parts a and b to calculate the coefficient of variation for each of the three alternatives.

4. On the basis of your findings, which of the three investment alternatives do you recommend? Why?

#### Solution Summary

Expected return, standard deviation of returns, coefficient of variation for each of three investment alternatives over the 4-year period are calculated.