Question 01 (20 Marks)

Alex is a 30-year-old, rich, young and dynamic individual who has, recently, built a huge cash reserve from a lottery lucky draw. Alex has approach Sandanam, a financial advisor, to invest OMR 1000000 in shares and bonds in stockmarket. Mr. Sandanam proposes to invest in two shares, MTech and CTech. He expects a return of 18 % from MTech and 6% from CTech. The standard deviation of returns is 11% for Jlfar and 2% for Clfar. The correlation coefficient between the returns is -0.8.

Three portfolios Sandanam is planning to propose to Alex. The following table provides the planned proportion between the two shares under each of the three portfolios.

Portfolio	Percentage in MTech	Percentage in CTech
1	30	70
2	75	25
3	20	80

Requirements

1. Calculate the expected return (average) and risk (standard deviation) for each of the portfolios. (10 Marks)
2. Advise the best portfolio for Mr. Alex. Your answer refers to risk return characteristics, and any other factor you deem necessary to provide the best advice to Mr. Alex. (10 Marks) (maximum 200 +/- 10% words)

Note: Expected return and the Risk of a portfolio can be calculated using the following formulae.

Expected portfolio return= (x₁ r₁) +(x₂ r₂)