Question 4 [25] A group of five friends decided to each contribute R2 000 to an investment pool and then to invest the total amount in the pool in one of two shares recommended to them by an investment analyst. The group members consider themselves to be rational investors. The recommended shares are shares in Industrial Engineering Ltd and Skytech Aviation (Pty) Ltd.

996 Skytech offers a return of 15% with a standard deviation of 6%. The group needs to determine the expected return and risk for Industrial Engineering's shares based on the following information: Business climate Probability Return Pessimistic 32% Fair 45% 12% Optimistic 23% 16% Required: 4.1. Calculate the expected return and risk for Industrial Engineering's shares. Show and round off all calculations to two decimals. (9) 4.2. Which share should the group invest in? Provide reasons for your recommendation. Show and round off all calculations to two decimals. (16)