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Consider the information for a portfolio reported in the following table. ...

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Finance

Consider the information for a portfolio reported in the following table.

Stock

Portfolio Weight (%)

Stock Beta

A

0.21

0.70

B

0.29

1.10

C

0.26

0.80

D

0.24

1.20

(a) Calculate the beta for this portfolio. (2 marks)

(b) Using your beta estimate from Part (a), comment on the relative volatility of this portfolio. If the market fell 2%, what portfolio return might you expect? (2 marks)

(c) If the risk free rate is 0.75% and the expected return on the market is 8%, calculate the expected return for this portfolio using your beta estimate from Part (a) and the capital asset pricing model (CAPM).

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