Question 1:

Question 2:

Based on Modern Portfolio Theory, explain what the variance and covariance terms are capturing. Which is a more relevant measure in a well-diversified portfolio? Briefly explain. If a portfolio has 5 individual stocks in it, how many total variance and covariance terms are there? [4 Marks] Investors suffered substantial portfolio losses during the recent market crash caused by the economic impacts of COVID-19. Explain whether these losses could have been avoided by applying Modern Portfolio Theory. [4 Marks)