(b) Suppose you invest 60% of your portfolio in Goil and 40% in GTUC. The expected cedi return on your Goil is 15% and on GTUC is 10%. Estimate your expected portfolio return. 2 Marks

(c) Suppose you invest 60% of your portfolio in Goil and 40% in GTUC. The expected return on your GOIL stock is 10% and on GTUC is 15%. The standard deviation of their annualized daily returns are 18.2% and 27.3%, respectively. Assume a correlation coefficient of 1.0 Calculate the portfolio variance and standard deviation using the Markowitz approach. 4 Marks

Question 3

(a) Consider the following information about the return distribution for Premier Ltd and the market.

State of the Economy	Probability	Market Return	Premier Ltd Return
Expansion	0.30	40%	60%
Normal	0.50	10%	25%
Recession	0.20	-15%	-40%

(i) Compute the expected return of each security 4 Marks

(ii) Compute the variance and standard deviation of each security 4 Marks

(iii) Compute the correlation between Premier Ltd.s return and the markets return 4Marks

(iv) Compute the beta of Premier Ltd with respect to the market 2Marks

(b) Briefly explain Markowitzs assumption of non-satiation and risk aversion 4 Marks

(c) Briefly explain commercial papers 2 Marks

Question 4

(a) The investment management process describes how an investor should go about making decisions and it can be explained by a five-step procedure. Explain in detail the five-step process. 10Marks

(b) Kharis has two investments, A and B.

	Investment A	Investment B
Expected return	0.07	0.12
Standard deviation	0.05	0.07

Required: Estimate the coefficient of variation for the investments 3Marks

(c) Distinguish between defensive stocks and cyclical stocks 3 Marks

(d) Explain the Efficient Market Hypothesis (EMH) 4 Marks