E File '1 (5 Home V" v Insert Design StatistltalAssignment. mm 'lSeprdeadline 8 Sep [Compatibility Mode] rwm Layout Referentes Mailings Review View Exercise 1 The following data are known for the returns of shares of two different companies: companies 1 and 2. Ms. de 511'th has a capital of 20,000 and wants to invest this capital entirely in shares of company 1 and company 2 (the weights are such that X1 + X2 = 1). X1: part of the assets invested in company 1 X2: part of the assets invested in company 2 We assume, for the sake of convenience, in sub-questions b), c), d) and e) that X1 = 0.5 and X2 = 0.5 (half of the assets invested in company 1 and the other half of the assets invested in company 2) The return for both companies depends on the economic situation (the development of the economy in the short run, inuenced by the demand for goods and services (the state of the business cycle)). The following table shows the return development of both companies: Business Cycle Probability Return Return Firm 1 Firm 2 Very low 20 % -0.10 0.05 Low 30 % 0.05 0.05 High 30 % 0.20 0.10 Very high 20 % 0.35 0.10 Sign In 9 Snare