You are considering investing in two different companies, Ayr Ltd and Home Hill Ltd. The returns...

 

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You are considering investing in two different companies, Ayr Ltd and Home Hill Ltd. The returns for these securities are shown in the table below. Year Ayr Home Hill 1 -10% 15% 2 15% -10% 3 6% 7.5% 4 -6% -5% Question Three. (Answer all parts) (10 Marks) (a) What is total risk? How is it measured? (b) (c) What is the return, variance and standard deviation of each of these individual shares? (6 marks) 5 12.5% 30% If I invested 50% of my wealth in investment Ayr and 50% of my wealth in investment Home Hill, what would be the expected return of the portfolio? Would you expect the variance of your combined investment in Company Ayr and Company Home Hill to be the simple average of the variance of the two investments? Explain your answer. (6 marks) What is systematic risk? How is it measured? What is the difference between total risk and systematic significant about this type of risk. (1 mark) (1 mark) risk? What is (1 mark) You are considering investing in two different companies, Ayr Ltd and Home Hill Ltd. The returns for these securities are shown in the table below. Year Ayr Home Hill 1 -10% 15% 2 15% -10% 3 6% 7.5% 4 -6% -5% Question Three. (Answer all parts) (10 Marks) (a) What is total risk? How is it measured? (b) (c) What is the return, variance and standard deviation of each of these individual shares? (6 marks) 5 12.5% 30% If I invested 50% of my wealth in investment Ayr and 50% of my wealth in investment Home Hill, what would be the expected return of the portfolio? Would you expect the variance of your combined investment in Company Ayr and Company Home Hill to be the simple average of the variance of the two investments? Explain your answer. (6 marks) What is systematic risk? How is it measured? What is the difference between total risk and systematic significant about this type of risk. (1 mark) (1 mark) risk? What is (1 mark)

Answer rating: 100% (QA)

To calculate the return variance and standard deviation of each individual share we can use the following formulas Return R Ending Value Beginning Value Beginning Value Variance Var Sum of Return Mean ... View the full answer