1. Calculate the Risk and Return of a portfolio comprised of asset A and B, where Rs.

100, 000 each

is invested in both the assets. The correlation of A and B return is 0.4. (12 marks)

Probability Return of Asset A Return of Asset B

Recession 20% 8% 4%
Normal 20% 10% 8%
Boom 60% 12% 16%

2. Calculate Beta of XYZ Enterprise from the following data: (8 marks)

Year Market Return (in %) XYZ Enterprises Return (in %)

1 4 8
2 6 10
3 -2 -10
4 8 12
5 12 18

3. You have put Rs.1000 in a savings account that pays 6.25% interest, and you will do this every
year for the next 18 years and withdraw the balance after that. How much will you withdraw? (7
marks)
4. You have won a lottery with a payoff of Rs.2500 at the end of every year for the next 10 years. If
you discount the cash flow at 7.8%, what is the least amount you will accept as a single payment
right now, instead? (8 marks)
5. What will a deposit of Rs.4500 at 12% compounded monthly be worth at the end of 10 years? (7
marks)