Question: Question 1 (15 marks) Use the following information to answer a). AAA Ltd BBB Ltd Expected Return 7% 10% Standard Deviation 16% 20% Beta 0.9

Question 1 (15 marks) Use the following information to answer a). AAA Ltd BBB Ltd Expected Return 7% 10% Standard Deviation 16% 20% Beta 0.9 1.1 Correlation between AAA Ltd and BBB Ltd is -0.22. Required: a) Assume that you have formed a two asset portfolio equally invested in AAA Ltd and BBB Ltd. i) Calculate the expected return of your portfolio. (1 mark) ii) Calculate the standard deviation of your portfolio. (3 marks) Use the following information to answer b) and c). Question 1 (15 marks) Use the following information to answer a). AAA Ltd BBB Ltd Expected Return 7% 10% Standard Deviation 16% 20% Beta 0.9 1.1 Correlation between AAA Ltd and BBB Ltd is -0.22. Required: a) Assume that you have formed a two asset portfolio equally invested in AAA Ltd and BBB Ltd. i) Calculate the expected return of your portfolio. (1 mark) ii) Calculate the standard deviation of your portfolio. (3 marks) Use the following information to answer b) and c)

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