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  3. 3. johana, a research analyst with rhb securities,

3. Johana, a research analyst with RHB Securities, has forecast for the following stocks. Probability...

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Accounting

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3. Johana, a research analyst with RHB Securities, has forecast for the following stocks. Probability (% 30 20 20 30 Expected return (%) BBB Bhd ZZZ Bhd 15 13 12 14 10 16 8 18 Required: a) Compute the expected return and standard deviation for both stocks. (5 marks) b) Calculate the covariance and correlation between the two stocks. (3 marks) c) Suppose an investor has RM500,000 and invests 100,000 shares in stock BBB, currently is selling at RM3.00 each, and the remainder in stock ZZZ currently selling at rm4.00 each compute the expected return and standard deviation of a portfolio (3 marks) d) What is your finding(s) from (b)? what are these two measures for? Explain your results and support with portfolio theory or market portfolio (5 marks) e) If you change your mind to invest RM200,000 in stock BBB and the remainder in stock ZZZ, what you can conclude from your result with (c). (5 marks) f) What you can conclude the measures of standard deviation is the result to proof as in a risk and return trade-off? justify your answer. (4 marks)

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