Question 6 (10 marks) The parts a) and b) below are independent questions which do not relate to each other. a) Kate has purchased a company's ordinary share today for $16 each. Her estimation on possible states of the economy and share prices is provided below. State of Economy Probability Price Boom 35% $25 Normal 45% $18 Recession 20% $11 Calculate the expected return of this share. Round your answer to the nearest cent. (2 marks) b) Answer parts i, il and ill based on the information below: An investment portfolio consists of a share and a bond. The return on each asset according to the state of economy is provided below: State of economy Boom Normal Recession Probability 30% 60% 10% Return on Share 10% 8% -5% Return on Bond 2% 7% 5% i. Calculate the expected return for the share and the bond. Round your answer to the nearest 0.01% (2 marks) II Calculate the standard deviation for the share and the bond. Round your answer to the nearest 0.01%. (4 marks) iii. Calculate the expected return of the portfolio if you allocate 40% of investment into share and the remaining into bond. Round your answer to the nearest 0.01%. (2 marks)