SECTION A: Question is compulsory and must be attempted Question 1 Shimugodi Tembo (SD) has been an entrepreneur since the time he lost his lob in the mind some years back Over the years si has been exposed to both investments in real assets and finnncial dissers. For financial assets, he has been exposed to both fixed income securities like bands and Treasury bills as well as equity instruments. As a successful entrepreneur ST is now focussed on identifying the best way to maximise his return and minimise the portfolio risk Currently ST line $10,000 available for investments. He is considering investing a quarter of this money in asset Yand the remaining amount in asset Y. Details of the assets are as follows: Asset Beta values Average retums 12% X 0.80 1696 1.25 The market risk premium is 10% while the yield on treasury bills is 4% Required: -) Brielly explain the concept of diversitication making reference to systematic risk and 116 marks] unsystematic risk. b) Calculate the average portfolio return for ST assuming the investment in asset X and asset Y is as initially planned. 16 marks Calculate the portfolio required rate of retum for ST. 14 marks] d) Comment on the acceptability of ST's portfolio based on the Jensen's ratio (ulphu). (4 marks ) Critically discuss the concept of investments being aggressive or detensive with regnrd to market performance. [10marks] [Total 40 marks