1. An investor has an investment capital of KES. 9,000,000. He wishes to invest in a portfolio of two securities, A and B in the following proportion; KES. 4,950,000 in security A and KES. 4,050,000 in security B.

The returns on these two securities depend on the state of the economy as shown below:

State of Economy	Probability	Return on Security A	Return on security B
Expansion	0.4	25%	5%
Boom	0.3	20%	10%
Recession	0.2	12%	20%
Depression	0.1	-20%	35%

Required:

1. Compute the expected portfolio return.
2. Determine the correlation coefficient between security A and Security B and interpret it.
3. Calculate the portfolio risk as measured by standard deviation.
4. Highlight four limitations of portfolio analysis.