(1)This exam paper contains 5 descriptive/conceptual and numerical questions of equal marks. All questions must be answered.

(2)For numerical/calculation-based questions, you must show all necessary/relevant workings. A single answer will not be accepted without these workings.

(3)You will need to type on the exam paper. Since it is a Take-Home test, please note that your completed exam paper will undergo Urkund for

(4)This is an open book exam. You will be given 14 hours time to download the exam paper, complete the exam and upload the exam paper with answers within this 14-hour window.

(5)The exam paper with answers must be uploaded in word format.

(6)Total mark is 50.

[4(a)] Mr. X invested in a portfolio of risk-free asset and a risky portfolio. Mr. X's complete portfolio consists of 40% investment in risk-free asset and 60% investment in risky portfolio. Mr. Y invests 100% in the same risky portfolio. Expected return on Mr. Y's risky portfolio is 15%. Assume both Mr. X and Mr. Y are on the same Capital Allocation Line (CAL). If the risk-free rate is 5%, what is the expected return on Mr. X's complete portfolio? (4 marks)

[4(b)] If the standard deviation of the risky portfolio is 20%, numerically prove that both Mr. X and Mr. Y are on the same CAL (3 marks)

[4(c)] Now assume that investments in risky portfolio as indicated in [4(a)] above are optimal for both Mr. X and Mr. Y. It is apparent that Mr. X is more risk averse than Mr. Y, since Mr. Y invests 100% of his fund in risky portfolio, while Mr. X invests only 60%. Numerically derive a value to prove that Mr. Y is less risk averse than Mr. X. You must show all relevant calculations (3 marks).