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Faezah has invested RM13,000, RM11,375, and RM8,125, respectively, in the these securities Aisya, AiChing, and Aiswarya. (a) Calculate the portfolio weights for each of the

Faezah has invested RM13,000, RM11,375, and RM8,125, respectively, in the these securities Aisya, AiChing, and Aiswarya.

(a) Calculate the portfolio weights for each of the three securities in Faezahs portfolio.

The table below provides the possible returns for the three securities in 2021.

Economy state

Probability

Aisya

AiChing

Aiswarya

Growth

30%

8%

15%

1%

Stagnant

50%

6%

5%

3%

Decline

20%

4%

-7%

9%

(b) Calculate each of the three securities expected return and standard deviation of return for 2021.

(c) Calculate Faezahs portfolios possible return under each of the three economy states for 2021.

(d) Calculate Faezahs portfolios expected return and standard deviation of return for 2021.

(e) What is the average proportion of total risk in Faezahs portfolio that has been eliminated through diversification?

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