Question: Question 13 You are given the following information: (Total: 12 marks) Correlation Matrix AAAA Ltd BBBB Ltd CCCC Ltd Standard Expected Deviation Return AAAA

Question 13 You are given the following information: (Total: 12 marks) Correlation Matrix AAAA Ltd BBBB Ltd CCCC Ltd Standard Expected Deviation Return AAAA Ltd 1.00 0.31 0.60 20.18% 18% BBBB Ltd 1.00 0.14 17.54% 12% CCCC Ltd 1.00 28.47% 16% (a) Calculate the standard deviation and the expected return of a portfolio that consists of 15 percent AAAA Ltd., 35 percent BBBB Ltd. and 50 percent CCCC Ltd. (6 marks) (b) Calculate the beta of the portfolio in part (a) given that the standard deviation of the market is 21 percent; and (ii) the correlation coefficient between the market and the companies are AAAA Ltd. 0.50 BBBB Ltd. -0.35 CCCC Ltd. 0.15 (6 marks)

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