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QUESTION THREE (20 Marks) Zimnat Ltd is considering putting together a portfolio containing two assets,...

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Finance

QUESTION THREE (20 Marks)

Zimnat Ltd is considering putting together a portfolio containing two assets, Mr Price and Truworths. Mr Price shares will represent 40% of the rand value of the portfolio, and Truwoths will account for the other 60%. The expected returns over the next six years, 2022 to 2027, for each of these assets, are given below:

year mr price % Truworth %
2022 14 20
2023 14 18
2024 16 16
2025 17 14
2026 17 12
2027 19 10

3.1 Calculate the expected portfolio return, E (rp) for each of the six years (6 marks)

3.2 Calculate the expected value of portfolio returns over the 6-year period. (4 marks) Calculate the standard deviation of expected portfolio returns over the 6-year period Use n-1 for for calculating variance and standard deviation

3.3 (6 marks) How would you characterize the correlation of returns of the two assets Mr Price and Truworths? (2 marks)

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