You are considering investing in two different companies, Alpha and Beta. The returns for these securities are shown in the table below.

Year Returns Returns

Alpha Beta

1 -15% -10%

2 5% 10%

3 12% 17%

4 18% 22%

(a) What is the return, variance and standard deviation of each of the shares?

(b) If I invested 50% of my wealth in share Alpha and 50% of my wealth in share Beta, what would be the expected return of the portfolio? Would you expect the variance of your combined investment in company Alpha and company Beta to be the simple average of the variance of the two investments? Explain your answer.