Question: The returns on AA Berhad and BB Berhad are given below, State of Economy Probability of occurring Return (%) AA Berhad Return (%) BB Berhad

The returns on AA Berhad and BB Berhad are given below,

State of Economy

Probability of occurring

Return (%) AA Berhad

Return (%) BB Berhad

1

0.30

6

-15

2

0.50

10

18

3

0.20

17

40

Calculate:

  1. Expected return E(R) for
  1. AA Berhad

(4 marks)

  1. BB Berhad

(4 marks)

  1. Standard deviation for
  1. AA Berhad

(5 marks)

  1. BB Berhad
  1. marks)

  1. Discuss any FOUR (4) benefits of diversification by referring to AA and BB Berhad.

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