Cloud asset management company intends to invest in two stocks with the following risk and return trade off;

Probability Stock A Stock B

0.1 33% 60%

0.2 20% 30%

0.4 15% 5%

0.3 0% - 20%

a) Calculate the expected return of Stock A and Stock B (2 Marks)

b) Calculate the risk of Stock A and Stock B (4 Marks)

c) Calculate coefficient of variation of Stock A and Stock B (2 Marks)

d) Calculate the expected return of the portfolio consisting of 50% of each stock (2 Marks)

e) Calculate the co-variance and correlation between returns of StockA and Stock B (3 Marks)

f) If you are risk averse investor which stock would you prefer to hold and why