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Page 4 of 4 Question 11 (10 points) Paul is considering investing in a portfolio with two assets A and B. The following is his prediction about future return of A and B in the next year: Probability Asset A 20% 12% 15% 30% 12.5% 40% 7.5% 10% 4.5% Asset B 10% 8% 5% Required a. Calculate the expected return and standard deviation of Asset A and B [4 marks) b. If Paul is going to invest 40% of his wealth on Asset A and the remaining to Asset B, what are the expected return and standard deviation of the portfolio? [4 marks] c. If the risk-free rate in the market is 1.25% and market return is 8.75%. Calculate required return of the portfolio based on CAPM. Should Paul invest in this portfolio or not? Why? 2 marks] R