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This question has two parts. Show all calculations. You are considering constructing a portfolio of two assets - Vibe Ltd shares and Aura Ltd shares.

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This question has two parts. Show all calculations. You are considering constructing a portfolio of two assets - Vibe Ltd shares and Aura Ltd shares. You want to invest $5,250 in Vibe Ltd shares and $9,750 in Aura Ltd shares. Due to the uncertainty facing the investment environment in 2021, you decide there is a 35% possibility of recession, 15% possibility of growth, or 50% possibility of economic stability. You believe under these states Vibe Ltd and Aura Ltd shares will provide the following returns: State Vibe Ltd Return Aura Ltd Return Growth 35% 22% Stable 10% 15% Recession - 229 7% a. Calculate the expected return of the portfolio consisting of Vibe Ltd and Aura Ltd shares. (Show answer as a percentage correct to 2 decimal places.) 5 marks b. If Vibe Ltd has a beta of 0.5, Aura Ltd has a beta of 2.5 and the risk free rate is 1.25% based on Reward Risk ratio are these shares correctly priced? Explain with calculations. (Show answers to Reward Risk ratio as percentages, correct to 2 decimal places) 5 marks

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