Expected Return and Risk and Portfolios

1) What has been the expected return and risk for the S&P 500 during that time period (average annual return and standard deviation)?

2) How does the portfolio fair compare to the S&P 500? Explain.

3) Your client has $50,000 to invest and you plan to invest 60% in the security with the highest expected return. What would be the characteristics of this portfolio be (E(R),S)?

4) Which portfolio would you recommend to your client? The one created in above (1 above) or the portfolio in (4) explain your reasoning

1) What has been the expected return and risk for the S& P 500 during that time period (average annual return

and standard deviation?)

Please refer to EXCEL for calculation, the expected annual return for the S& P 500 is

E(R) = 0.108 = 10.8%
Its standard deviation is S = 0.199

2) How does the portfolio fair compared to the S&P 500? Explain

Because in this question we need to compare average annual returns, so we should change the monthly returns

into annual term and the new result is calculated in the “portfolio…” file.
In this way, the portfolio’s expected ANNUAL …

This solution involves calculations for expected return and risk and various questions about portfolios.