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 .