1. The expected return, risk, and investment amount for each asset in a portfolio are...
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1. The expected return, risk, and investment amount for each asset in a portfolio are given below. Currently, required return of the market (Rm) is 13%, and RRF is the same as expected return of T- bill. Situation 1: Let's assume that first, you are applying "Capital Market Theory, by investing in T-Bill as part of your portfolio. TABLE 1.1 Beta Investments ($) Expected return (%) 2.00 Standard Deviation (%) 0 0 299,000 8.00 10.00 0.65 200,200 T-bill (1-year) Sanz 3-year Bond rating BB+ BBL stock Kerry Logistics stock 17.00 14.00 20.00 24.00 1.15 1.30 351,000 449,800 Correlation Matrix T-Bill BBL stock Sanz 3-yr Bond Kerry Logistics stock T-Bill Sanz 3-yr Bond BBL stock Kerry Logistics stock 1.0 0.25 0 0 1.0 0.30 0.50 1.0 0.80 1.0 A. Apply CAPM, calculate Beta of the portfolio, and Required return of the portfolio with 4 assets. Assume your portfolio composed of those assets in Table 1.1. (2 points) B. Calculate Expected rate of return for portfolio with 4 assets listed in Table 1.1? (2 points) C. What is the standard deviation for the portfolio with 4 assets in Table 1.1? (11 points) = Standard deviationport =
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