Question
In addition to KiwiSaver you are considering whether you should invest in a small, diversified portfolio
comprising four asset classes with an equal allocation to each; cash, global bonds, global shares and
global property.
Past returns (illustrative only) for each asset class are as follows
2019 2020 2021
Cash 1.5% 0.8% 0.5%
Global bonds 3.5% 4% -1%
Global shares 15% -5% 5%
Global property 18% -2% 3%
Before you commit to investing in this portfolio you decide to calculate the historical risk and return
characteristics of the proposed portfolio for the entire three-year period.
Required
a. Create a table displaying the historical risks and returns of (i) each asset class and (ii) the
proposed portfolio. [Use arithmetic returns rather than geometric returns]
3 marks
b. Plot your answers from part (a) on a chart with risk on the x axis and return on the y axis.
1 marks