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QUESTION 3 [30 MARKS] A portfolio consists of two assets, the expected returns and standard deviations of returns of which are listed in the table below: Expected Return Standard Deviation REQUIRED a) Calculate: (1) Asset 1 11% 0.19 Asset 2 20% 0.26 The expected return for a portfolio which is equally weighted between the two assets. [3 marks] (ii) The correlation coefficient for the two-asset portfolio, assuming that the covariance is 0.0167. [3 marks] (iii) The variance of returns for the equally weighted portfolio, assuming a covariance of 0.0167. [3 marks] (iv) The standard deviation of returns for the equally weighted portfolio. [3 marks] (b) A portfolio consisting of two assets has a correlation coefficient of 0.8. Another two asset portfolio has a correlation coefficient of -0.8. In the absence of any other information, which portfolio should you invest in? Justify your reasoning. [6 marks] (c) 7th September 2016 will be celebrated as a big day in the history of the global technology industry as the merger between Dell-EMC came to fruition. As Dell- EMC merged into one, the global technology industry cheered. After years of steady courtship, the deal finally saw the light of the day. However, the fate of this merger is yet to be seen. But have you ever thought, why some mergers are successful while some have gone sour? The reason is simple. Those mergers which have happened for the right reasons have stayed on, while those which came together for wrong reasons or were executed badly have gone kaput. (i) What are the risk areas in a Merger and acquisition transaction? [6 Marks] (ii) What type of resources are needed to complete a successful Merger and acquisition transaction? [6 Marks] QUESTION & On