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Calculate the beta and expected return of the portfolio

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Question: Ms Tan is the manager of a portfolio consisting of stocks as shown below. The market risk premium is 8% and the risk-free rate is 3%.

Stock H: $2m (investment), 1.4 (beta)

Stock I: $3m (investment), 1.0 (beta)

Stock J: $5m (investment), -0.2 (beta)

(a) Calculate the beta and expected return of the portfolio.

(b) Appraise and discuss why Ms Tan included stock J in the portfolio.

(c) Ms Tan strongly believes that the stock market would rise in the next one year. Discuss one (1) possible way that she could use to increase the performance of the portfolio if the stock market were to rise.

Reference no: EM132756130

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