Mojo ltd. is considering three possible capital projects for next year. Each project has a one-year life, and project returns depend on next years state of the economy. The estimated rates of return are shown below. STATE OF THE PROBABILITY RATE OF RETURN ECONOMY OF OCCURRENCE P W M Recession 0.25 11% 10% 15% Average 0.50 15% 14% 13% BOOM 0.25 17% 19% 10% REQUIRED:

a. Find each project expected rate of return, variance, standard deviation and coefficient of variation. 7 marks b. Compute the correlation coefficient between

i. P and W 3 marks ii. P and M 3 marks iii. W and M 3 marks

c. Compute the expected return on a portfolio if the firm invests equal wealth on each asset. 3 marks d. Compute the standard deviation of the portfolio. 4 marks