QUESTION 2 (23 Marks) Aisyah, a new investor cannot decide whether to invest in Stock Media...

 

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QUESTION 2 (23 Marks) Aisyah, a new investor cannot decide whether to invest in Stock Media Prima or Stock Astro, or in a portfolio which is a combination of both stocks. She has approached RHB securities and the firm has provided her with the following information. Probability (%) 30 20 20 30 1 2 Expected return (%) Stock Media Prima 13 14 15 16 Stock Astro Using these stocks, she has identified two investment portfolio alternatives: Alternatives 15 13 12 11 Portfolio 100% Stock Media Prima 40% of Media Prima and 60% of Astro a) Calculate the expected return for Stock Media Prima and Stock Astro b) Calculate the standard deviation for Stock Media Prima and Stock Astro (3 marks) (5 marks) c) Calculate the covariance for the above stock. (4 marks) d) Is the combination of the above stock can be considered as an optimum diversification? Justify your answer. (2 marks) e) Calculate the portfolio return for each alternative. (3 marks) f) Calculate the portfolio standard deviation for each alternative. (4 marks) g) Based on the findings above, which alternatives is the best for Aisyah to choose? Justify your answer. (2 marks) QUESTION 2 (23 Marks) Aisyah, a new investor cannot decide whether to invest in Stock Media Prima or Stock Astro, or in a portfolio which is a combination of both stocks. She has approached RHB securities and the firm has provided her with the following information. Probability (%) 30 20 20 30 1 2 Expected return (%) Stock Media Prima 13 14 15 16 Stock Astro Using these stocks, she has identified two investment portfolio alternatives: Alternatives 15 13 12 11 Portfolio 100% Stock Media Prima 40% of Media Prima and 60% of Astro a) Calculate the expected return for Stock Media Prima and Stock Astro b) Calculate the standard deviation for Stock Media Prima and Stock Astro (3 marks) (5 marks) c) Calculate the covariance for the above stock. (4 marks) d) Is the combination of the above stock can be considered as an optimum diversification? Justify your answer. (2 marks) e) Calculate the portfolio return for each alternative. (3 marks) f) Calculate the portfolio standard deviation for each alternative. (4 marks) g) Based on the findings above, which alternatives is the best for Aisyah to choose? Justify your answer. (2 marks)

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