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1) Consider the following data for the returns on shares of Splash Company and that of the Ice Cream Manufacturing Company (ICMC): Event Probability Splash
1) Consider the following data for the returns on shares of Splash Company and that of the Ice Cream Manufacturing Company (ICMC): Event Probability Splash share return (%) ICMC share return (%) Hot weather 0.2 5 30 Modestly warm 0.6 15 15 Cold weather 0.2 20 2 1.0 Required: a. Calculate the expected return and standard deviation for each share. b. An investor is considering investing in both shares in the following proportion: 80% in ICMC and 20% in Splash Company. Calculate the expected returns of this portfolio investment. C. Calculate the standard deviation of the portfolio if the correlation coefficient (p) between Splash and ICMC is -0.25
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