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There are FOUR questions in this section. Candidates MUST answer ALL questions. Question 1 a) Explain the concept of risk and return and their components.
There are FOUR questions in this section. Candidates MUST answer ALL questions. Question 1 a) Explain the concept of risk and return and their components. (8 marks) b) You are considering a security with the following possible rates of return; State of Probability Return Economy Boom 0.20 0.21 Normal 0.70 0.13 Recession 0.10 -0.09 Based on the above information, calculate the following: i. Calculate the expected return for the security. (6 marks) ii. Calculate the standard deviation for the security. (6 marks) iii. Calculate the coefficient of variation of return and interpret its result. (5 marks) (TOTAL: 25 MARKS)
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