Security Weight Return Standard Deviation

A 60% 0.15 20%

B 40% 0.27 26%

Correlation Co-efficient is 40%

Portfolio Two

Security Weight Return Standard Deviation

A 60% 0.20 22%

B 40% 0.30 28%

Correlation Co-efficient is 10%

The company is considering choosing between one of these portfolios because of recent liquidity problems.

Required

a) Calculate the expected return of portfolio one (3marks)

b) Calculate the portfolio risk of portfolio one (6marks)

c) Calculate the Expected Return of Portfolio Two (3 marks)

d) Calculate the Portfolio Risk of Portfolio Two (6marks)

e) Advise management