1. Describe characteristics of companies that would be good to combine into a portfolio.

(5 marks)

1. Explain why one portfolio made up of the same companies (but not in the same proportions) as another portfolio can be undesirable in comparison.

(5 marks)

1. Given that the annual returns for company A and Company B are as shown in the table below:

Required:

Find the average return and standard deviation of returns for these two companies.

What will be the average return and risk of a portfolio (for the two stocks from 2015 - 2019), if it consists of 75 percent of Company A and 25 percent of Company B?

Please provide a detailed answer for me to get a good marks.

Year Company A (%) Company B. (%) 2019 7.94 -8.34 2018 9.87 51.28 2017 5.63 84.70 2016 28.73 64.49 2015 -21.59 24.70