I. Mr Entrepreneur's entire wealth of 50m consists of shares in the company he founded. He is not happy holding such an undiversified portfolio. Hence, he has decided to sell 50% of his shares in his company to invest in another publicly listed company. His analyst has advised him to invest in XYZ limited, which is also a large and publicly traded company. Explain carefully if Mr Entrepreneur can reduce his total risk a. if XYZ's stock is twice as volatile as his company's stock (12 marks) b. if XYZ's stock is thrice as volatile as his company's stock (8 marks) II. For a sample of 100 days in 2013 and 2014, the US dollar to euro and the US dollar to British pound exchange rates were recorded. The sample means were 1.3340 US$/ and 1.6082 US$/. The respective sample standard deviations were 0.03865 US$/ and 0.05873 US$/. Do a hypothesis test to determine whether there is a difference in variability between the two exchange rates. Use a = 0.05 as the level of significance. (10 marks) I. Mr Entrepreneur's entire wealth of 50m consists of shares in the company he founded. He is not happy holding such an undiversified portfolio. Hence, he has decided to sell 50% of his shares in his company to invest in another publicly listed company. His analyst has advised him to invest in XYZ limited, which is also a large and publicly traded company. Explain carefully if Mr Entrepreneur can reduce his total risk a. if XYZ's stock is twice as volatile as his company's stock (12 marks) b. if XYZ's stock is thrice as volatile as his company's stock (8 marks) II. For a sample of 100 days in 2013 and 2014, the US dollar to euro and the US dollar to British pound exchange rates were recorded. The sample means were 1.3340 US$/ and 1.6082 US$/. The respective sample standard deviations were 0.03865 US$/ and 0.05873 US$/. Do a hypothesis test to determine whether there is a difference in variability between the two exchange rates. Use a = 0.05 as the level of significance. (10 marks)