1. The T-Bond return in table 1 is shown to be independent of the economy because no matter what the current status of the economy is, the bond will still be returning 8%. The bond is also not entirely risk free due to the fact that it is exposed to inflation, however it will not be a real factor due to the short period of time for return. 2. When looking solely upon expected returns the S&P 500 fund looks like the clear-cut best option coming in with a 15% return. 3. When measuring Standard Deviation and CV of a return you are measuring how much a price increases or decreases for each unit of return or the volatility of the security. The coefficient of variance is the better measure because it also uses expected returns, giving a more accurate view of how the security compares to its peers. When looking at all the securities a 1-year bond is the best option due to the fact that it has a CV of 0. 4. A) Compared to the individual stocks, the expected returns of the portfolio rank in the middle of the pack with 11.15% while its Standard Deviation is the second best only to the 1-Year Bond. Its coefficient variation is also very good compared to the rest of the group coming it at .25920, second again to the 1-Year Bond. Something that makes the two of these a good combination for a portfolio is the fact that one does very well in a recession while the other does very well in a boom.
B) If using 75% of Gold Hill the portfolio is going to become less appetizing with a lower return and a higher CV. If you were to use 75% of Tyco it might not necessarily be a bad thing because it will give you a higher return but also come with more risk. 5. If investing in both TECO and S&P 500 you will have a much different result then from Gold Hill TECO because of the similarities between the two stocks. Both TECO and S&P have negative returns when in