On 2^nd January 2020, Bans limited invested Sh 400,000 of his fund in shares of Euro limited and Sh 800,000 in share of Dollar limited when Euro share were trading at Sh 25 each and Dollars shares were at Sh 40 each.The market expectation, a boom economy may prevail where a Euro share may trade at year end at Sh 45 and pay a dividend of Sh 3 per share. Dollar shares may trade at Sh 67 each after paying a dividend of Sh 5 per share. Alternatively, the economy may experience a mild recession where the price of Euro share at year end may be Sh 36 per share while that of Dollar is Sh 45 per share. No dividend is expected under this state of economy.The boom economy has a probability of 0.4 while mild recession has 0.6.

EURO LIMITED.

Required.

a. compute Bans Limited portfolio return and risk.

b. Jose was presented with above information. In addition, he was asked, " if Ban purchased some more shares of Yen Limited, a different company in a differentindustry, the portfolio of the three securities would have a lesser risk compared to the two-asset portfolio. Do you agree'? Jose took some five minutes and then answered, "It depends". Explain why Jose answer may be correct.