Scanned with Camscariner Problem 3. Refer to the following information on the return iseributions for the assets in which you are contemplating to invest in, 120 marks] State of Economy Probability that the return i the state Retum if the sta state of cconomy occurs OCCUES Asset AA Asset BB BOOM 10% 40% 6096 AVERAGE 40% 20% 3096 BELOW AVERAGE 20% 20% LOW POOR 30% -20% -30% In addition to the above return distribution the two sets (AA& BB) operate in different industries and hence characterized by a market risk (Beta) of 2 and respectively. The market risk premium (RM-RF) or the slope for fairly correctly priced assets is 19%. In the same economy government treasury bills reward a risk free retum of about 11% Required Calculate the expected return for assets AA & BB respectively [4 marks] b. Calculate the required rate of retum assets AA & BB respectively using the CAPM 4 marks) c. Calculate the standard deviation for assets A & BB respectively 4 marks) d. If the company wants to invest in the two assets with the ratio of 45:55 what is the Penfolio Standard deviation and Portfolio retum 4 marks] c. If the company wants to invest in the two assets with the ratio of 50-50 what is the portfolio Beta and Portfolio required rate of return [ 4 marks