80 0.04 100 0.01
a. For each project, compute:( 1) The range of possible rates of return.( 2) The expected return.( 3) The standard deviation of the returns.( 4) The coefficient of variation of the returns.
b. Construct a bar chart of each distribution of rates of return. c. Which project would you consider less risky? Why?
P8 – 13 Portfolio return and standard deviation Jamie Wong is considering building an investment portfolio containing two stocks, L and M. Stock L will represent 40 % of the dollar value of the portfolio, and stock M will account for the other 60 %. The expected returns over the next 6 years, 2015 – 2020, for each of these stocks are shown in the following table.
Expected return Year Stock L Stock M 2015 14 % 20 % 2016 14 18 2017 16 16 2018 17 14 2019 17 12 2020 19 10 a. Calculate the expected portfolio return, rp, for each of the 6 years.
b. Calculate the expected value of portfolio returns,, over the 6-year period.
c. Calculate the standard deviation of expected portfolio returns,, over the 6-year period.