Question: QUESTION 1 (20 MARKS) (a) Define: i. Systematic Risk. ii. Unsystematic Risk. (3 marks) (b) As a financial manager, you have been asked for an

QUESTION 1 (20 MARKS) (a) Define: i. Systematic Risk. ii. Unsystematic

QUESTION 1 (20 MARKS) (a) Define: i. Systematic Risk. ii. Unsystematic Risk. (3 marks) (b) As a financial manager, you have been asked for an advice in selecting one of the assets and have been given the following investments. Probability, Pi (%) 25 40 35 Return on asset A, CA (%) -4 Return on asset B, rB (%) 9 4 Recession Normal Boom 8 20 -4 i. What is the expected rate of return for each asset? (6 marks) ii. What is the standard deviation for each asset? (10 marks) iii. Which asset will you choose and why? (1 mark)

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