Q.1.

Suppose stocks of Apple and Qmoblie have the following Probability distribution of
expected future returns:
Probability Apple Qmobile

0.2 (11%) (27%)

0.3 3 0
0.4 11 23
0.1 28 40
 Calculate the expected rate of return for Apple and Qmoblie
 Calculate coefficient of variation (CV) for Apple and Qmoblie, is it possible that
most investor might regard Apple less risky than Qmoblie? Explain

(b) If you are a money manager and formed a $ 400,000 portfolio, investing $200,000 in
each stock. Calculate the Expected return of the portfolio if it consists of Apple and
Qmoblie.

Q.2.Total risk of the portfolio can be divided in two types. (a) Company Unique Risk (b)
Systematic risk. Briefly explain both of the types with a diagrammatic representation.

(b)As an investor investing on standalone basis calculate the following for the given
outcomes

OUTCOME PROBABILITY Outcome Value Outcome Value

1 2
A 10% $1000 $ 3000
B 20% $2000 $2000
C 40% $3000 $1500
D 20% $4000 $4500
E 10% $5000 $4000

 Calculate the expected rate of return for Outcome value 2

 Calculate the Standard Deviation for Outcome value 1
 Calculate coefficient of variation (CV) for Outcome value 1
Solve 5-9