Question # 3 (8 marks) A portfolio consists of two stocks: Stock Expected...
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Question # 3 (8 marks) A portfolio consists of two stocks:
Stock Expected Standard Beta Weight Return Deviation
X 8.85% 5.9% 1.2x 30% Y 10.3% 5.75% 1.8x 70%
The correlation between the two stocks returns is 0.40.
Required: (a) (5 marks) Calculate the expected return, standard deviation, and Beta of the portfolio
(b) (3 marks) Given that the risk free rate is 2% and the expected market rate is 9%, would you invest in this portfolio? Why?
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