Rosenior plc has been investing surplus funds in a small portfolio of shares over the past few years. Details of the portfolio are as follows:

The current market return is 12 per cent and the yield on Treasury bills is 5 per cent. 

(a) Is Ronsenior’s portfolio more or less risky than that of the market portfolio? Support your answer with appropriate calculations.

(b) Give Ronsenior plc advice on how it should change the composition of its portfolio, giving a rationale for the changes that you recommend.

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Company Knight Bird Sibley Davies Cashin No. of shares 70,000 150,000 100,000 80,000 130,000 Beta 1.27 1.53 1.01 0.95 0.82 Share price (£) 3.75 4.25 2.50 4.50 3.50 Dividend yield (%) 5.6 3.5 4.2 6.2 4.8 Expected return (%) 12 16 14 9.5 15