1. You are an Investment Analyst at a fund management company, Northland Asset Management Ltd. You are asked to analyze the characteristics of two stocks, Wanaka Holdings Ltd. and Pukaki Consolidated Ltd. Below is a table showing some of the data you have gathered:

Stock	Beta	Standard Deviation	Covariance with Market
Wanaka		40%	0.012
Pukaki	1.44	45%

In addition, you also know that the expected return on the NZX50 (the market index) is 12% and the risk-free rate of interest presently is 5%. Assume that you can borrow and lend at the risk-free rate.

1. Suppose the volatility (standard deviation) of the market is 15%. What is the Beta of Wanaka? What is Pukakis covariance with the market?

2. What are the correlations between Wanaka and the market? What are the correlations between Pukaki and the market?

3. What would be the weight of Wanaka and Pukaki in a portfolio that has exactly the same expected rate of return as the market?

1. You are an Investment Analyst at a fund management company, Northland Asset Management Ltd. You are asked to analyze the characteristics of two stocks, Wanaka Holdings Ltd. and Pukaki Consolidated Ltd. Below is a table showing some of the data you have gathered:

Stock	Beta	Standard Deviation	Covariance with Market
Wanaka		40%	0.012
Pukaki	1.44	45%

In addition, you also know that the expected return on the NZX50 (the market index) is 12% and the risk-free rate of interest presently is 5%. Assume that you can borrow and lend at the risk-free rate.

1. Suppose the volatility (standard deviation) of the market is 15%. What is the Beta of Wanaka? What is Pukakis covariance with the market?

2. What are the correlations between Wanaka and the market? What are the correlations between Pukaki and the market?

3. What would be the weight of Wanaka and Pukaki in a portfolio that has exactly the same expected rate of return as the market?