Question: Suppose you are given returns for assets A, B and C in the table below: State Probability (P) Return A (RA) Return B (RB) Return

Suppose you are given returns for assets A, B and C in the table below: State Probability (P) Return A (RA) Return B (RB) Return C (RC) Boom 30% 25% -0.2 0.3 Average 50% 15% 0.15 0.2 Recession 20% -20% 0.25 0.1 (a) Calculate the expected return for assets A and B and indicate which asset provides a better return. (b) Calculate the expected return on a portfolio consisting of only assets A and B assuming K75,000,000 has been invested in each of the assets. (c) Calculate the risk on investments A and B and comment on the results. (d) Calculate the risk on a portfolio consisting of assets A and B and comment on the results in relation to

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