1 Abdullah decides to invest in the share market. He gathers some information about the economic conditions and the probability of the returns that he will get. You have been assigned to help Abdullah to determine the risk and return of the investment by answering the following questions using the data in the given table? TOPIC 3 INVESTMENT RETURNS AND RISKS 47 Economic Situation Recession Average Probability (P) 0.1 Return Company A 10% 15 Return Company B -15% 10 0.5 03 25 Above average Boom 20 40 0.1 30 (a) What is the expected return of each asset? (b) What is the variance of the return? (c) What is the standard deviation of the return? (d) What is the range of the return within 1 standard deviation? (e) Which company should Abdullah invest in? Why? Use the data from Question 1 and calculate the covariance and correlation coefficient between the two assets. What is the return and risk of a portfolio that consists of 30% in A and 70% in B from Question 1. 2. 3