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2a. Amina plans to invest 54% of her savings in a commodity based mutual fund and 46% in an emerging market based mutual fund. The
2a. Amina plans to invest 54% of her savings in a commodity based mutual fund and 46% in an emerging market based mutual fund. The expected return on the two funds are 16% and 14%, respectively. The standard deviations are 22% and 18%, respectively. The correlation between the two funds is 0.75. What would be the expected return and standard deviation for Amina's portfolio? (10 marks) 2b. A fund manager with a leading savings & loan company wants to evaluate a Portfolio consisting of a mix of blue-chip, defensive and cyclical shares. He has compiled the following useful information for this purpose. Average Return Std Deviation Beta Portfolio 16 14 0.88 S&P 500 ( market 14 Portfolio) Treasury Bills 12 Assist the fund manager in evaluating the performance of the Portfolio and the S&P 500 using Sharpe and Treynor measures. Based on your calculation, comment on the performance of the Portfolio and the S&P 500 using Sharpe and Treynor measures. (10 marks)
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