Reference no: EM132575064

You are a financial investor who actively buys and sells in the securities market. Now you have a portfolio, including four shares: $5,500 of Share A, $4,600 of Share B, $5,700 of Share C, and $2,500 of Share D.

Required:

a) Compute the weights of the assets in your portfolio.

b) If your portfolio has provided you with returns of 5.7%, 10.5%, 8.7% and 13.2% over the past four years, respectively. Calculate the geometric average return of the portfolio for this period.

c) Assume that expected return of the stock A in your portfolio is 13.2%. The risk premium on the stocks of the same industry are 6.8%, betas of these stocks is 1.2. Calculate the risk-free rate of return using Capital market pricing model (CAPM).

d) You have another portfolio that comprises of two shares only: $500 blue chip shares and $700 junk shares. Below is the data of your portfolio:

e) Compute the expected risk (standard deviation) of the portfolio.

Give a proper explanation with formulas applied.