Consider the two securities, X and Y. The expected returns and standard deviations for the two securities are shown in Table 1 below.

Table 1: Expected return and standard deviation of return for X and Y

Security	Expected return	Standard deviation
X	0.13	0.29
Y	0.30	0.55

Question 1: Calculate the expected return and standard deviation of a portfolio that comprises of 40% in X and the remainder in Y. Correlation between the returns for the two assets is 0.38.

Question 2: Shares in ABC public limited company started the year at 22.50 per share and ended the year at 32. During the year the company paid 3 dividend per share. What is the dividend yield on ABC's share?

Question 3: Examine the role asset diversification plays in the creation of an efficient investment portfolio.

Answer rating: 100% (QA)

Question 1 To calculate the expected return and standard deviation of a portfolio comprising 40 in X and the remainder in Y we can use the following formulas Expected Return of Portfolio Expected retu... View the full answer