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Red rock capital management are developing a fund with the following stocks: Stock BATS Compass...

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Accounting

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Red rock capital management are developing a fund with the following stocks: Stock BATS Compass Grp Nat. Grid BP Astra Zeneca Market capitalization (108) Beta 78 1.10 36 1.35 46 0.28 143 1.22 126 0.37 Table 1: Stock data Given that the risk free rate of return is 1%, and the expected return from FTSE100 is 6%, use the information in Table 1 to calculate i) weight of each stock to include in the fund, ii) the fund beta and thereby the expected return of the fund. What does the portfolio beta indicate? Comment on the expected return of the portfolio and its volatility. r

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