Question 4 Grape plc is considering the following two investment opportunities for which the expected returns and associated probabilities are as follows depending on the economic climate: Economic climate probability of occurrence Returns from A (%) Returns from B (%) Recession 0.2 -12 22 Stable 0.5 14 16 Growth 0.3 20 -10 Question: a) Calculate the expected return and standard deviation of investment A (1.5 marks) b) Calculate the expected return and standard deviation of investment B (1.5 marks) c) Calculate the covariance and correlation coefficient of the two investments (3 marks) d) What is the correct allocation of resources (weights) between the two investments, which will give the minimum standard deviation for the resulting portfolio? (3 marks) e) Calculate the portfolios expected return and standard deviation (3.5 marks)
© 2015 MSA Homework Help All Rights Reserved
Disclaimer: MSA Homework Help provides reference papers to the student and we strongly recommend you not to submit the papers as it is. Please use our solutions as model answer to improve your skills.