Answer to Question #134028 in Economics for Tshegofatso maponyane

Question

Mary Johnson decided to diversify her portfolio as set out below.

Shares Proportion exp return beta standard dev

J Ltd. 20%. 12%. 0.9. 10.9%

P Ltd. 15%. 15%. 1.15. 13%

Q Ltd. 50%. 8%. 0.60. 7.5%

Z Ltd. 5%. 16%. 1.25. 15%

M Ltd. 10%. 19%. 1.5. 25%

How would you interprete the beta of Z ltd(1.25) ?How would you interprete the standard deviation of P ltd ?Calculate the expected return of the potential portfolio.Calculate the portfolio beta of the potential portfolio.How does diversification reduce overall risk? Is it better to invest in J Ltd or P Ltd? Substantiate with calculations

Answer 1

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