FIN 301 - Financial Management In class Activity Risk and Return- 1. What is Risk? 2. Mention and explain the two major classifications of risk? 3. What two tools can you use to measure risk? What kind of measures are these two? 4. Harry Markowitz suggests that investors should build a diversified portfolio of securities. How can investors build such portfolio. Draw a graphical illustration of a fully diversified portfolio 5. 6. IF two investments have a correlation of -1, what does that mean? 7. Two securities X and Y have the following data. Security Return Probability 30 25 20 0.3 0.4 0.3 50 30 10 0.2 0.6 0.2 Calculate the expected return for each security separately and for a portfolio of 60%X and 40% Y b. a. Calculate the expected risk of each security separately and that of portfolio. What happens to portfolio risk and return compared to individual security risk and return? c. What is the Expected return, Standard deviation, Variance and Coefficient of Variation of Super Lux shares if their historical returns are as follow: 2013 18% 2014 21% 2015 20% 2016 25% 2017 26% 8. Check 2296, 9.2, 3.03, .1377