The following table provides the 2005-2009 annual returns for AIG Insurance and New York Life Insurance

Give details:

Solution:

Find the Portfolio that contains 30% of AIG and 70% of NYL

For this we have to multiply the AIG returns by .3( which means 30% weightage given to this one for new portfolio construction ) and multiply the NYL return by 0.7(which means 70% weightage given to this one for new portfolio construction) and then add both the values, So the formula will be looks like =((B2*0.3)+(C2*0.7)) (Note: the excel is starts with A1) and same has to repeated for all years

Average return:

This simple calculated by adding all the years return and divide by no of years, here we have 5 years so add the return and divide it by 5 , for the AIG the total return is 36.1% and it is divided by 5 so the average return is 7.22% ,

Formula =AVERAGE(B2:B6)

Do it for all the portfolio

Standard deviation:

This is a statistical function can be done by the inbuild function called stddev, To get this function just type =stddev and you will get this function and then select all the data’s that you want to include to find the standard deviation

Formula= =STDEVA(B2:B6)

So the answer will looks like

Variance:

Variance is square of standard deviation , so we can calculated this by multiplying the standard deviation with the standard deviation

Formula: B8*B8

So the final result looks like