Question 6 (9 marks)

The parts a) and b) below are independent questions which do not relate to each other.

1. Sally purchased a rental property for $756,000 today. She expects to receive rent of $480 per week over the following 12 months. She also expects the price of the property in 12 months time would be as follows according to the probabilities.

Probability	Property Price ($)
30%	910,000
50%	820,000
20%	690,000

Using this information answer parts i) and ii) below

1. Calculate the expected return for this property if Sally plans to sell the property in one year. (Round your answer to the nearest 0.01%) (3 marks)

ii. Calculate the standard deviation for Sallys investment if she plans to sell the property in one year. (3 marks)

b, Vivienne has $10,000 cash she can use for investments. Company As share has an expected return of 10%p.a. Company Bs bond has an expected return of 5% p.a. Vivienne wants to set up a portfolio including the two assets. If Vivienne wants a return of 8% p.a. from her portfolio. How much should she invest in Company As share and how much should she invest in Company Bs bond? (Round your answers to the nearest cent.) (3 marks)