"IDPIC 1: RISK S: RETURN [54 marks] Question 1 Johnson, a risk averse investor, is considering creating a portfolio of two company stocks. The rst company, Orion Industries Ltd, is a manufacturer of breakfast cereal and is the dominant company in this industry. The second company, Natural Containers Ltd, is a manufacturer of plates, containers and cups made from rice, potatoes and limestone. The portfolio created will consist of 60% shares in Orion and d'. shares in Natural Containers. The price and dividend data for the two companies for the last 3 years, 2016, 201'? and 2018 are shown in Table 1 below. Cirion Industries Ltd. Natural Containers Ltd. _TDCK PRICE _TCICK PRICE Yea Beginni End Divide Beginni End of Divide r 119 of 11d ng of Year Year Year Paid Year ' ------ 6 It is assumed that each year's returns for both companies are equally probable. Assistjohnson in his assessment of the proposed investment by answering the following questions. a} Calculate the annual return of each company's stock [ marks) b] Calculate the expected return for each asset over the 3year period? (4 marks) c) Estimate the standard deviation for each company's stock returns. [6 marks} d] Calculate the expected return of the portfolio (4 marks) e} Calculate the portfolio's standard deviation [6 marks) f] As a risk averse investor] ohnson will only invest in the portfolio if it has a coefcient of variation that is below [Lift]. Should Johnson invest in the portfolio? {4 marks}