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| | Probability | Share A | Share B | Market |
| Boom | 30% | 15% | 25% | 16% |
| Normal | 50% | 10% | 20% | 13% |
| Recession | 20% | 2% | 1% | 7% |
You are given the following information on shares A and B. Using the information provided, answer the questions that follow:
- 4.1. Which share (A or B) is riskier? Provide calculations to support your answer. (9)
- 4.2. Using relevant calculations, prove that the correlation coefficient of shares A and B is
0.97.
(4)
4.3. Calculate the level of systematic and unsystematic risk in Share A.
(5)
4.4. If you choose to form a portfolio by investing 70% in Share A, and 30% in share B, calculate the standard deviation of the portfolio.
(3)
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