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Sophia is considering setting up an investment portfolio. She has $10,000 cash on hand and would like to spend $3758 on Share A and the

Sophia is considering setting up an investment portfolio. She has $10,000 cash on hand and would like to spend $3758 on Share A and the remaining on Bond B. The market price for the share today is $29. She also has the following expectation on the share price and bond return in 6 months time. Assume no coupon or dividend is received during the period of holding.

Probability

Share A Price

Bond B Return

60%

$35

-2%

40%

$25

5%

  1. Sophia wants to use the below formula to calculate the expected return of Share A.

    Calculate the following variables in the formula above.

    Round your answer to the nearest 0.01% (2dp). Do not include the % symbol. Do not use comma separators. For example, if your answer in decimal is 0.123456, 12.35 would be the correct format.

    R1=Answer% (1 mark)

    R2=Answer% (1 mark)

  2. Calculate the expected return of Bond B.

    Round your answer to the nearest 0.01% (2dp). Do not include the % symbol. Do not use comma separators. For example, if your answer in decimal is 0.123456, 12.35 would be the correct format.

    E(R)Bond B=Answer% (1 mark)

  3. Sophia wants to use the below formula to calculate the expected return of her portfolio.

    Calculate the following variables in the formula above.

    Round your answer to the nearest 0.01% (2dp). Do not include the % symbol. Do not use comma separators. For example, if your answer in decimal is 0.123456, 12.35 would be the correct format.

    x1=Answer% (1 mark)

    x2=Answer% (1 mark)

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