a) The assets of X, Y and Z have the following risk and return statistics.

Expected return Assets-X 16% Standard Deviation-X 20%.

Assets-Y 20% Standard Deviation-Y 25%.

Assets-Z 25% Standard Deviation-Z 35%.

Correlation Coefficient between X and Y 0.50

X and Z 0.75

Y and Z -1.00

Required:

1. Determine the expected rate of return and risk of portfolio comprised on 25 percent X, 50 percent Y, and 25 percent Z.
2. Determine the expected rate of return and risk portfolio comprised equally weight age of Stock-X, Stock-Y and Stock-Z (1/3 each stock)

b) Mr. Ahmed established the following spread on the ABC companys Stock.

1. Purchased Five 2-month call option with a premium of $3 and an exercise price of $ 50.
2. Purchased Five 2-month put option with a premium of $0.60 and an exercise price of $40.

The current price of ABC companys stock is $45.

Required; Determine Ahmeds profit or loss if ;

1. The price of ABC Company stays at $45 after 2 months.
2. The price of ABC Company falls to $30 after 2 months.
3. The price of ABC Company rise to $55 after 2 months.