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Zimnat Ltd is considering putting together a portfolio containing two assets, Mr Price and Truworths....

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Finance

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: Expected return

Year Mr Price % Truworths %

2022 14 20

2023 14 18

2024 16 16

2025 17 14

2026 17 12

2027 19 10

Mr Price %

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)

3.3 Calculate the standard deviation of expected portfolio returns over the 6-year period Use n-1 for for calculating variance and standard deviation

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

3.5 Discuss any benefits of diversification achieved through the creation of the portfolio

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