6 of 6 ID: FMTH.RR.ERVS.03A Michael and Janine are both investors wanting to purchase investment portfolios. The expected return, standard deviation and beta of various investments are shown in the following table: Average Standard Investment Beta return over last year (% pa) Deviation (% pa) Apocryphal Industries 20 14 3.2 Bona Fide Ltd Market Index 10 9 8 1.2 10 year Bond 4 2 2 1 0 Michael wants a portfolio that has an expected return of 15% pa and that contains only Apocryphal Industries and 10 year bonds. Janine wants a portfolio with a 80% weighting in Apocryphal Industries and a 20% weighting in Bona Fide Ltd shares. The correlation coefficient between the returns of the shares in Apocryphal Industries and Bona Fide Ltd is -0.8. a) Calculate the percentage of each share that Michael should include in his portfolio to achieve his desired results. Give your answers as a percentage to the nearest percent. Investment Apocryphal Industries Bona Fide Ltd 10 year Bond Percentage to invest % pa % pa % pa b) Janine is interested in finding out how risky her portfolio is. Calculate the standard deviation of Janine's portfolio. Give your answer as a percentage to 2 decimal places. Standard deviation = % pa