11. JULY2021 (S1) - Q1 A. Energy Bhd is currently evaluating two (2) securities: Active Bhd and Dynamic Bhd for investment purposes. The following information relate to Active Bhd and Dynamic Bhd and the overall market for the coming year.

	Active Bhd	Dynamic Bhd
Expected Return	17.0%	14.50%
Standard Deviation	12.50%	14.30%
Price to Earnings Ratio (times)	20	10
Debt to Equity Ratio	63%	47%
Total Earnings (RM)	12 million	37.5 million
Outstanding Shares (units)	24 million	15 million

Additional information: Market Expected Return 10.0% Market Standard Deviation 3.3% Covariance (Active, Dynamic) 42.4 Covariance (Active, Market) 15.5 Covariance (Dynamic, Market) 10.4 Correlation (Active, Dynamic) 0.237 Treasury bill rate 4%

For the year 2021, Energy Bhd has allocated RM250,000 and is considering buying shares in both stocks based on the following proportion of investment portfolios:

	Active Bhd	Dynamic Bhd
Portfolio 1	10,000 units	6,000 units
Portfolio 2	6,250 units	7,500 units

Required: a. For each of the Portfolio 1 and 2, calculate the following: i. Expected Return of the portfolio. (5 marks) ii. Standard Deviation of the portfolio. (4 marks) iii. Beta of the portfolio. (4 marks) b. Based on answer in (a) above, assist Energy Bhd to choose the better option of portfolio that fits its risk profile if Energy Bhd is a high tolerance of risk.

(2 marks)