Question 5

1. Shares A and B have the following characteristics:

Stock	Expected return	Standard deviation	Correlation
A	10%	20%	0.5
B	15%	40%

If as an investor you are looking for a portfolio that consists of shares A and B and has an expected return of 12%, what should be the distribution of shares A and B in the portfolio (weights)? What will be the standard deviation of the wallet?

B) Suppose you have to invest some money and you want to invest in the following 2 options:

(a) risk-free government bond with an expected annual yield of 10%

(b) a share with an expected annual yield of 29% and a standard deviation of 39%.

If you build a portfolio with the above 2 options with a standard deviation of 28%, what will be the expected return?

2. You are given the following possibilities regarding the stage at which the economy can be found, and the corresponding return for the AKE share. What is the expected standard yield and standard deviation for ACP?

State of the economy	Chance	Expected yield for AKE stock for the year
Good	25%	15%
Ok	40%	8%
Bad	35%	-3%

D) For the last 3 years the annual return of share B was 0%, 10% and 26%. The annual market return was + 6%, 18%, 24%, respectively. Calculate the beta of the stock.