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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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