You are given the following annual returns for PKP Berhad and PKPB Berhad for the period 2006 2020. PKP Berhad is in the food industry, whilst PKPB Berhad in hi-tech industry.

	Rate of return	Rate of return
Year	PKP Berhad	PKPB Berhad
2020	-0.141	0.222
2019	0.203	0.079
2018	-0.036	-0.220
2017	-0.204	0.527
2016	0.073	-0.628
2015	-0.111	0.684
2014	0.023	1.146
2013	0.291	0.564
2012	0.448	0.885
2011	0.482	0.433
2010	0.196	0.516
2009	0.103	-0.056
2008	0.075	0.153
2007	0.780	1.207
2006	0.254	0.736

Use the above table to determine the following:

1. What are the expected return and standard deviation of each security?

(5 marks)

2. What is the covariance and correlations between the pair of the securities?

(5 marks)

3. Compute the correlation coefficient of the stocks? Based on (b) and (c), what conclusion can you arrive with regards to the relationship between the returns of the two stocks?

(5 marks)

4. What are the expected return and standard deviation of a portfolio, If the proportion invested in PKP Berhad and PKPB Berhad depends on the last alphabet of your mothers name as shown in the table below?

5. What do your answers in part (a), (b), (c), and (d) imply about diversification? Explain.

Last alphabet of your mothers name	Percent of Investment in PKP Berhad	Percent of Investment in PKPB Berhad
A D	55	45
E H	52	48
I L	51	49
M P	48	52
Q U	45	55
V Z	43	57

E.g., If your mothers name is Mariam; so the last alphabet is M. You need to select 26% tax rate.