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tion 2 [51] Briefly explain how covariance and correlation are used by investors to make investment decisions. n (20) A family member of yours is considering investing in the shares of two companies, Jetprop (Pty) Ltd and Cybermatic Ltd. The family member collected the following nvestment and economic data relevant to the two companies and approached you to assistance with the analysis of the data in order for him to make an informed investme Tecision. Economy Probability Expected return Expected return Jetprop shares Cybermatic shar Pessimistic 0.35 4% 8% Normal 0.40 11% 16% Optimistic 0.25 15% 9% Page 10 Additional information: The rate of return on RSA 10-year treasury bonds is 8.82%. The current market return is 13%. The standard deviation of the market return is 2.5%. The expected return on Cybermatic shares is 11.5% with a standard deviation of 3.7%. equired: 2.1. Calculate the expected return and standard deviation for Jetprop shares. (2) 2.2. Calculate the covariance of returns as well as the correlation between the two shares. (6) .3. Explain the extent of the relationship between Jetprop and Cybermatic shares based on the results of the covariance and correlation. (10) 4. Calculate the expected portfolio return and portfolio risk based on a portfolio consisting of 30% Jetprop shares and 70% Cybermatic shares. (7) 5. Should the family member invest in this portfolio? Give reasons for your recommendation. (6) [28] fila cutters in its factory with