You are an investment advisor and one of your clients need an advice regard to an investment of

R120 000 in shares in the mining sector of the JSE. You have gathered data and assigned probabilities to expected returns under four possible market conditions. The following probabilities have been assigned to two individual shares, and to a unit trust. The unit trust is a widely diversified portfolio with a beta of 1.

	Expected returns (%)
Market condition	Probability	Econet	Net one	Telecel Trust
Poor	0.2	-12	12	-6
Moderate	0.3	6	12	18
Good	0.4	36	18	30
Exceptional	0.1	54	24	42

You may assume that, despite the small number of readings, the distributions all have the characteristics of a normal distribution. In addition, you may assume that borrowing and lending is possible at the risk-free rate of 10%.

Required:

1.1 Calculate the beta of Net one. (8 Marks)

1.2 If your client invested R24 000 in Econet and R96 000 in Net one, calculate the expected

return and total risk of the portfolio. (12 Marks)

Note: Round your answers to the nearest two decimal places.

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