please show the working out
This question is worth 10 marks in total. This is a written calculation question, and you should perform the necessary calculations/working on paper to later be scanned and uploaded. Start a new page for this question. For dollar amounts, give your answer to the nearest cent. For interest rates, give our answer as a percentage rounded to 2 decimal places. If any parts of the question use values from earlier parts, use the EXACT values from earlier parts. QUESTION START An investor buys 1 share of ABC Ltd at the price of $30 on December 1, 2021. The firm is not expected to pay any dividends. Consider the following four possible scenarios for the share price on December 1, 2021 $55 with a probability of 12% $39 with a probability of 60% $25 with a probability of 19% $15 with a probability of 9% . a) Calculate the expected return for holding the share for a year. (2 marks) b) Calculate the variance of return and standard deviation of return. (3 marks) c) On December 1, 2021, it turns out that the share is worth $38.5, and the investor also just received a dividend of $3.6. Calculate the total holding period return and capital gains return over the one-year period. (2 marks) d) Discuss a benefit of portfolio diversification. Explain how to achieve this benefit. (2 marks) e) "The standard deviation of a portfolio's return can be reduced to zero by holding all the securities in the market." True or false? Explain. (1 mark) QUESTION END You will need to scan this question and upload it to Learn via the Final Exam submission link. Please disregard the box below (or enter anything you want into it), it doesn't have any effect on your grade. QUESTION START An investor buys 1 share of ABC Ltd at the price of $30 on December 1, 2021. The firm is not expected to pay any dividends. Consider the following four possible scenarios for the share price on December 1, 2021 $55 with a probability of 12% $39 with a probability of 60% $25 with a probability of 19% $15 with a probability of 9% a) Calculate the expected return for holding the share for a year. (2 marks) b) Calculate the variance of return and standard deviation of return. (3 marks) c) On December 1, 2021, it turns out that the share is worth $38.5, and the investor also just received a dividend of $3.6. Calculate the total holding period return and capital gains return over the one-year period. (2 marks) d) Discuss a benefit of portfolio diversification. Explain how to achieve this benefit. (2 marks) e) "The standard deviation of a portfolio's return can be reduced to zero by holding all the securities in the market" True or false? Explain. (1 mark) QUESTION END You will need to scan this question and upload it to Learn via the Final Exam submission link. Please disregard the box below (or enter anything you want into it), it doesn't have any effect on your grade
