Please calculate the expected return and standard deviation

Please calculate the expected return and standard deviation for each of the three portfolio alternatives. Please calculate the expected return and standard deviation for each of the three portfolio alternatives.

Solution

ALTERNATIVE 8

expected return = 0.60*(0.07+0.09+0.12+0.16+0.15) + 0.40*(0.14+0.13+0.12+0.11+0.10)

expected return = 0.60*(0.59) + 0.40*(0.6)

expected return = 0.594

variance = 0.60* (0.59-0.594)^2 + 0.40* (0.60-0.594)^2

variance = 0.0000096 + 0.0000144

variance = 2.4x10^-5

standard deviation = 4.8989x10^-3

ALTERNATIVE 9

expected return = 0.55* ( 0.03+0.07+0.10+0.12+0.13) + 0.45*(0.07+0.09+0.12+0.16+0.15)

expected return = 0.55*(0.45) + 0.45*(0.59)

expected return = 0.513

variance = 0.55* ( 0.45 - 0.513)^2 + 0.45* (0.59 - 0.513)^2

variance = 2.18x10^-3 + 2.668x10^-3

variance = 4.84805x10^-3

standard deviation = 0.0696

ALTERNATIVE 10

expected return = 0.33*(0.45) + 0.33*(0.59) + 0.34*(0.6)

expected return = 0.5472

variance = 0.33*(0.45-0.5472)^2 + 0.33*(0.45-0.5472)^2 + 0.34*(0.6-0.5472)^2

variance = 3.117787x10^-3 + 3.1177872x10^-3 + 0.4474

variance = 0.4536986

standard deviation = 0.67357