QUESTION 5 Note that the question involves historical data and ex post analysis is therefore required Step 1-Calculate the arithmetic mean returns for the two securities ∑k kx0.10+0.140.03 0.07 y=012+010+005 0.09 Step 2- Calculate the standard deviation of the returns for the two securities (k-k (0.100.0y+(0.140.07+(-0.030.0 0.00090.00490.01 =√0.0079 =0.08888 (0.13009+(010009+05009 0.00090.00040.0016 =√0.0013 =0.0360555July 2003 QUESTION 5 Note that the question involves historical data and ex post analysis is therefore required. Step 1- Calculate the arithmetic mean returns for the two securities 0 . 0 9 3 0 . 1 2 0 . 1 0 0 . 0 5 k 0 . 0 7 3 0 . 1 0 0 . 1 4- 0 . 0 3 k n k k Y X n i 1 i = + + = = + = = = Step 2 - Calculate the standard deviation of the returns for the two securities ( ) ( ) ( ) ( ) ( ) ( ) ( ) 0 .0 3 6 0 5 5 5 0 .0 0 1 3 2 0 .0 0 0 9 0 .0 0 0 1 0 .0 0 1 6 3 -1 0 .1 2- 0 .0 9 0 .1 0- 0 .0 9 0 .0 5- 0 .0 9 0 .0 8 8 8 8 0 .0 0 7 9 2 0 .0 0 0 9 0 .0 0 4 9 0 .0 1 3 -1 0 .1 0- 0 .0 7 0 .1 4- 0 .0 7 - 0 .0 3- 0 .0 7 n -1 k - k 2 2 2 k 2 2 2 k n i 1 2 i k Y X = = + + = + + = = = + + = + + = = =   