Question: Share More (Pty) Ltd is considering expanding its current share portfolio investments to mitigate its risk profile. The companys management consider themselves conservative investors with
Share More (Pty) Ltd is considering expanding its current share portfolio investments to mitigate its risk profile. The companys management consider themselves conservative investors with an expected return of 15%. The financial manager knows that you have passed your Financial Management and asked you to assist him with the calculations. The manager collected the following information for the purposes of evaluating the different risks and returns: Company Expected return Standard deviation Impahla 14% 4.2% Khula 17% 3.5% Umvuzo 18% 2.1% The covariance between Impahla and Khula is 0.01 and the covariance between Impahla and Umvuzo is 0.0. Required: Note: Show all calculations and round off your answers to two decimals. 4.1 Calculate the portfolio return and standard deviation for the portfolio consisting of 50% of Impahla and 50% of Khula shares. 4.2 Calculate the portfolio return and standard deviation for the portfolio consisting of 40% of Impahla and 60% of Umvuzo shares 4.3 Considering your calculations above, in which one of the two-share portfolios identified above should Share More (Pty) Ltd invest?
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