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Required: a) Estimate the expected returns and standard deviation for the shares of Rose plc. (3 marks) b) Estimate the expected returns and standard deviation
Required: a) Estimate the expected returns and standard deviation for the shares of Rose plc. (3 marks) b) Estimate the expected returns and standard deviation for the shares of Orchid plc. (3 marks) c) Estimate the covariance between the returns of the shares of Rose plc and Orchid plc. (3 marks) d) Estimate the correlation coefficient between the returns of the shares of Rose plc and Orchid plc. (3 marks) e) Estimate the risk and returns of a portfolio invested 50% in shares of Rose plc and 50% in shares of Orchid plc. (4 marks) f) Explain why investing in a portfolio is better than investing in a single security. (5 marks) g) Explain the role of the correlation of the returns of two securities in the risk of a portfolio which is invested in these two securities. (4 marks) (Total 25 marks)
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