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QUESTION 2 [25 MARKS] Suppose General Construction Itd has two investments (A and B) with the following probability distributions: Economic Outlook INVESTMENT A RETURN INVESTMENT A PROBABILITY INVESTMENT B RETURN INVESTMENT B PROBABILITY 5 % 0.2 7% 0.2 15 % 0.6 14% 0.6 Best outcome (Boom) Most likely outcome (Growth) Worst outcome (Slump) 25% 0.2 21% 0.2 REQUIRED (a) Calculate the: (0) Expected return of Investment A [2 marks] (ii) Standard Deviation of Investment A [3 Marks] (iii) Expected return of Investment B [2 marks] (iv) Standard Deviation of Investment B [3 Marks] (b) The portfolio of A and B has a positive correlation of 0.20 and the portfolio comprises 40 percent Investment A and 60 percent Investment B. Calculate: (i) Expected return of Portfolio AB [4 Marks] (ii) Standard Deviation of Portfolio AB [6 Marks] (c) There are two elements of risk attached to any security: systematic (market) and unsystematic (specific). Explain the difference between these two elements of risk. [5 Marks]