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1. Suppose you are an analyst working for a firm tracking the Asian markets. Given the recent coronavirus outbreak, you have predicted the following states
1. Suppose you are an analyst working for a firm tracking the Asian markets. Given the recent coronavirus outbreak, you have predicted the following states of the Asian markets and one year return of the stock in each of these states along with its associated probabilities: Consider that based on your model, you are attending a team meeting. Give your response to the following questions in the meeting: (a) The manager asks you what one year expected return and risk of a portfolio entirely concentrated in the Asian market? (b) Suppose one of your colleagues mentions that given the current scenario in China and various other countries, clients will be wary of an all-equity portfolio. The fund managers will have to consider a portfolio comprising of 50% investment in a risk-free debt fund and the rest in the Asian equity market. What are the expected risk and return of this portfolio if the 1-year return of the risk-free debt fund is 5%
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