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a) “The standard deviation of a portfolio's return cannot be reduced to zero by holding all...

a) “The standard deviation of a portfolio's return cannot be reduced to zero by holding all the securities in the market.” True or false? Explain. (2 mark) An investor buys 1 share of ABC Ltd at the price of $32 on December 1, 2019. The firm is not expected to pay any dividends. Consider the following three possible scenarios for the share price on December 1, 2020: $50 with a probability of 30% $35 with a probability of 60% $23 with a probability of 10% b) Calculate the expected return for holding the share for a year. (2 mark) c) Calculate the variance of return and standard deviation of return. d) On December 1, 2020, the share is worth $36 and the investor just received a dividend of $2.50. Calculate the total holding period return and capital gains return over the one-year period. e) Explain the difference between expected return and realised return.

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