Q1. Assume that you recently graduated with a major in finance, and you just landed a job as a financial planner with Aurizin Inc., a large financial services corporation. Your first assignment is to invest PKR 100,000 for a client. Because the funds are to be invested in a business at the end of 1 year, you have been instructed to plan for a 1-year holding period. Further, your boss has restricted you to the following investment alternatives, shown with their probabilities and associated outcomes. Aurizinia economic forecasting staff has developed probability estimates for the state of the economy, and its security analysts have developed a sophisticated computer program that was used to estimate the rate of return on each alternative under each state of the economy. Asancesy. Limited is a technology and communications firm: Cyan Ltd is an investment company and AKGL Co. manufactures foam and allied products. Aurizin also maintains an "index fund which owns a Market weighted fraction of all publicly traded stocks; you can invest in that fund, and thus obtain average stock market results. Given the situation as described, answer the following questions. a) Calculate the expected rate of return of Avanceon in the table below. [Marks 02] Returns on alternative Investments The estimated rate of retum State of the Economy Probability T-Bills Asanceen. Cyan Ltd. AKGL KSE-100 Recession 0.1 8.00% -22.00% 28.00% 10.00% -13.00% Below average 0.2 8.00% -2% 14.70% -10% 1% Average 0.4 8.00% 20% 0.00% 7% 15% Above average 0.2 8.00% 35% -10.00% 45% 29% Boom 0.1 8.00% 50% -20.00% 30% 43% ? 1.70% 13.80% 15.00% 0.00% ? 13.4% 18.8% 15.3 CV ? ? 1.4 1.0 Beta 0.0 1.29 -0.86 0.68 1.0