a) Compute the expected total return and standard deviation for both securities. (8 marks)

b) Compute the covariance and correlation coefficient between Security A and Security B. (6 marks)

c) Find the portfolio return and risk if 40% is invested in Security A and 60% invested in Security B. (6 Marks)

Aberdeen Asset Management Company is considering to diversify their portfolio in two types of securities with the following returns: Probability 0.15 0.35 0.20 0.30 Security A 8% 5% -4% -6% Security B 6% 3% 2% 10%