1. The analytical method also called the variance-covariance method makes use of knowledge of the input values and any pricing models along with assumptions of normal distribution to analyze risk. The historical returns of two investments A and B for a given period in time are summarized in the table below showing percentage rates of return and probability occurrences

Probability	Investment A %	Investment B %
0.3	12	19
0.2	14	16
0.2	16	12
0.3	18	10

Required:

i. Determine the risk of a portfolio consisting of 45% A and the rest is B

2 a) Suppose that you own 5,000 shares worth $25 each. How can a forward contract be used to provide you with hedging against a decline in the value of your holding over the next 4 months?

b). A company knows that it is due to receive a certain amount of a foreign currency in 4 months. What type of derivative contract is appropriate for hedging? Explain how it works