Solution-How would you characterize the correlation of

How would you characterize the correlation of returns

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Reference no: EM131299079

Assume you are considering a portfolio containing two assets, L and M. Asset L will represent 40% of the dollar value of the portfolio, and asset M will account for the other 60%. The projected returns over the next six years, 2018-2023, for each of these assets are summarized in the following table.

	Projected Return (%)
Year	Asset L	Asset M
2018	14%	20%
2019	14%	18%
2020	16%	16%
2021	17%	14%
2022	17%	12%
2023	19%	10%

1. Use an Excel spreadsheet to calculate the projected portfolio return, r_p, for each of the six years.

2. Use an Excel spreadsheet to calculate the average portfolio return, r_p, over the six-year period.

3. Use an Excel spreadsheet to calculate the standard deviation of expected portfolio returns, s_p, over the six-year period.

4. How would you characterize the correlation of returns of the assets L and M?

5. Discuss any benefits of diversification achieved through creation of the portfolio.

Reference no: EM131299079

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How would you characterize the correlation of returns

Reference no: EM131299079

Reference no: EM131299079

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