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You are considering investing. You decided to create an investment portfolio based on two recent Initial Public Offerings (IPO). You have the following data on

  1. You are considering investing. You decided to create an investment portfolio based on two recent Initial Public Offerings (IPO). You have the following data on Stationery and Supplies Limited (SOS) and Express Catering Limited.
SOS Limited Express Catering Limited
Expected Return 15% 8%
Standard Deviation 20% 10%
Correlation 0.5

You perused both prospectus and excited by each company's strategy and their respective outlook. You are so excited that you invested 50% in SOS Limited and 50% in Express Catering.

  1. Compute the expected return on the portfolio. (2 marks)
  2. Compute the variance and standard deviation of the portfolio. (4 marks)

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