Return data on three assets A, B, and C.EXPECTEDRETURN Investment Alte

QUESTION

Return data on three assets A, B, and C.EXPECTEDRETURN Investment Alterna
Alternative 1: Year Return 2007 16 2008 17 2009 18 2010 19 Average return = (16 17 18 19) / 4 = 17.5 Variance of returns = (16 17.5)^2 (17 17.5)^2 (18 17.5)^2 (19 17.5)^2 = 5 Std dev of returns = sqrt(5) = 2.236 Alternative 2: Year Return 2007 16.5 2008 16.5 2009 16.5 2010 16.5 Without calculation, the std dev of

returns is 0, since there is novariation in returns. Alternative 3: Year Return 2007 15 2008 16 2009 17 2010 18 Average return = (15 16 17 18) / 4 = 16.5 Variance of returns = 5 Std dev of returns = sqrt(5) = 2.236

ANSWER:

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