For the next two questions (37-38), ASSUME that the one year returns for COMPANY A are still {25%, -15%, 120%, -30%, -45%}. Assume also that you acquired shares in COMPANY B, which has had annual returns over the same period, of:

{27; 35%; -10%; 10%; -15%}.

Q37.What is the correlation between the returns on COMPANY A and COMPANY B shares?

Multiple Choice

• - 0.204

• 0.567

• - 0.356

• 0.278

Q38. Assume that you own a portfolio comprised of 45% COMPANY A and 55% COMPANY B.

What return do you expect to earn next year on this portfolio?

Multiple Choice

• 13.58%

• 10.12%

• 15.25%

• 9.74%