Solve for 3 and 4

Question 1: Assume that you are considering selecting assets from among the following four candidates: (6 Marks) Asset 2 Probability Asset 1 Return Probability 18 1/6 12 1/3 6 1/2 Return 11 Good Good 1/6 Average Bad Average Bad 5 -2 1/3 1/2 Asset 4 Asset 3 Return Probability 20 1/6 Return Probability Good Good 10 4 Average Bad 14 10 1/3 1/2 Average Bad 1/6 1/3 1/2 0 Assume that there is no relationship between the amount of the rainfall and the condition of the stock market: 1. Solve for the expected return and the standard deviation of return for each separate investment. 2. Solve for the correlation coefficient and the covariance between each pair of investments. The covariance's pairs are the following: COV 1.4 COV 1,2 COV 23 COV13 COV 24 COV 34 3. Solve for the expected return and variance of each of the portfolios shown below. Portfolio Portions Invested in Each Asset Asset 1 Asset 2 Asset 3 Asset 4 A 1/2 1/2 B 1/2 1/4 1/4 1/5 4/5 D 1/5 2/5 2/5 1 4. Based on your knowledge about the Modern Investment Theory by Harry Markovitz, draw the efficient frontier graph, determining the locations of each portfolio on the curve and then interpret your which portfolio is worth to invest in? and why