R SECTION A COMPULSORY QUESTION 1 (20 MARKS) An investment company has provided you with the following information: Economic Conditions Probability Expected Return Expected Return Security A Security B Strong Economy 0.4 50% 55% Growing Economy 0.3 35% 40% Stable Economy 0.2 25% 35% Poor Economy -10% -5% 0.1 REQUIRED (a) Calculate expected return of Security A. (3 marks) (b) Calculate expected return of Security B. (3 marks) (c) Calculate risk or standard deviation of Security A. (4 marks) (d) Calculate risk or standard deviation of Security B. (4 marks) (e) Calculate the covariance between Security A and Security B. (6 marks) Page 2 of 5