QUESTION 3 (a) Assume there are N securities in the market. The expected retu 10 percent. All securities also have the same variance of 0.014 between any pair of securities is 0.0064 . REQUIRED: (i) Briefly explain the key determinants of the expected returns and made up of several risky assets. (ii) What is the expected return of an equally weighted portfolio con (iii) What will happen to the variance as N gets larger (iv) What security characteristics are most important in the determ of a well-diversifies portfolio? (b) Mollel plc manufactures sunglasses, and therefore, its returns seasons. Another company Mwani plc manufactures umbre returns are best during rain seasons. The return on the shares below, together with the probability of when a particular weath N securities in the market. The expected return of every security is curities also have the same variance of 0.0144 and the covariance of securities is 0.0064 . rey determinants of the expected returns and variance of a port-folio risky assets. ( 3 marks) ed return of an equally weighted portfolio containing all N securities ( 2 marks) o the variance as N gets larger (1 mark) acteristics are most important in the determination of the variance portfolio? ( 2 marks) tures sunglasses, and therefore, its returns are best during sunny company Mwani plc manufactures umbrellas and therefore, its uring rain seasons. The return on the shares are shown in the table th the probability of when a particular weather 'event' may occur. QUESTION 3 (a) Assume there are N securities in the market. The expected retu 10 percent. All securities also have the same variance of 0.014 between any pair of securities is 0.0064 . REQUIRED: (i) Briefly explain the key determinants of the expected returns and made up of several risky assets. (ii) What is the expected return of an equally weighted portfolio con (iii) What will happen to the variance as N gets larger (iv) What security characteristics are most important in the determ of a well-diversifies portfolio? (b) Mollel plc manufactures sunglasses, and therefore, its returns seasons. Another company Mwani plc manufactures umbre returns are best during rain seasons. The return on the shares below, together with the probability of when a particular weath N securities in the market. The expected return of every security is curities also have the same variance of 0.0144 and the covariance of securities is 0.0064 . rey determinants of the expected returns and variance of a port-folio risky assets. ( 3 marks) ed return of an equally weighted portfolio containing all N securities ( 2 marks) o the variance as N gets larger (1 mark) acteristics are most important in the determination of the variance portfolio? ( 2 marks) tures sunglasses, and therefore, its returns are best during sunny company Mwani plc manufactures umbrellas and therefore, its uring rain seasons. The return on the shares are shown in the table th the probability of when a particular weather 'event' may occur