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Calculate the percentage of share

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Michael and Janine are both investors wanting to purchase investment portfolios. The expected return, standard deviation and beta of various investments are shown in the following table:

Apocryphal Industries

17 (Ave return) 14 (SDev) 1.8 (Beta)

Bona Fide Ltd

12 (Ave return) 10 (SDev) 1.0 (Beta)

Market Index

12(Ave return) 2 (SDev) 1(Beta)

10 year Bond

6 (Ave return) 3( SDev) 0(Beta)

Michael wants a portfolio that has an expected return of 10% pa and that contains only Apocryphal Industries and 10 year bonds.

Janine wants a portfolio with a 21% weighting in Apocryphal Industries and a 79% weighting in Bona Fide Ltd shares. The correlation coefficient between the returns of the shares in Apocryphal Industries and Bona Fide Ltd is -0.6.

a) Calculate the percentage of each share that Michael should include in his portfolio to achieve his desired results. Give your answers as a percentage to the nearest percent.

b) Janine is interested in finding out how risky her portfolio is. Calculate the standard deviation of Janine's portfolio. Give your answer as a percentage to 2 decimal places.

Reference no: EM132575101

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