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Consider the following information: State of Economy Probability of State of Economy Rate of Return if the State Occurs Omega Ltd Delta Ltd Boom 0.7
- Consider the following information:
State of Economy | Probability of State of Economy | Rate of Return if the State Occurs | |
Omega Ltd | Delta Ltd | ||
Boom | 0.7 | 8% | 2% |
Bust | 0.3 | 4% | 15% |
(a) Calculate the expected return on a portfolio consisting of 65 percent investment in Omega and 35 percent in Delta. (2 marks)
(b) Calculate the standard deviation of the portfolio. (3 marks)
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