Question 6 (This question has three parts (a), (b) and (c))

1. Your client, Jane Hislop, has an investment portfolio which is 30% invested in Fund 1 and 70% invested in Fund 2. Calculate the beta of her portfolio if:
   • The standard deviation of Fund 1 is 8%, the standard deviation of Fund 2 is 16% and the standard deviation of the market is 10%.
   • The correlation between Fund 1 and the market is 0.9 and the correlation between Fund 2 and the market is 0.7.
2. Explain to Jane how risky her individual fund investments are, and the risk of her portfolio relative to the market.
3. Relative to return of the market, what return can she expect from her individual funds, and from her overall portfolio?