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What is the expected portfolio return

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Reference no: EM133088009

Question - Your current investment portfolio consists of the following:

Security

Investment

Expected Return

Beta

Stock 1

$10,000

8.0%

1.2x

Stock 2

6,000

4.0%

0.8x

Risk-free Deposit

4,000

1.0%

0.4x

Required -

(a) What is the expected portfolio return?

(b) If the average market return is 5%, what is the required return of this portfolio?

(c) Based on your results in parts (a) and (b), would you be willing to keep this portfolio? Explain.

(d) Define the concept of Beta as it relates to security pricing.

(e) Is this portfolio in "equilibrium"? Explain.

Reference no: EM133088009

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