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Compute the standard deviation of returns

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Reference no: EM132753104

The following information is provided on the forecasted returns of two firmsSIA Airlines Ltd and HQ Furniture Ltd.

State of Return on Return on

The Economy Probability Tamaya Airlines Guillow Furniture

Good 0.7 14% 22%

Bad 0.3 6% 3%

Required:

a. Compute the expected returns of Tamaya Airlines and Guillow Furniture.

b. Derive the standard deviation of returns of Tamaya Airlines and Guillow Furniture.

c. Calculate The covariance of returns between Tamaya Airlines and Guillow Furniture

d. Find the expected return on a portfolio that comprise 60% of funds in Tamaya Airlines and 40% of funds in Guillow Furniture.

e. Compute the standard deviation of returns of the portfolio in part d above.

f. Discuss THREE systematic risk factors facing major airlines today.

Reference no: EM132753104

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