1. You have a portfolio with the following stocks: Stock Investment beta A $20,000 0.72 B $20,000 0.84 C $30,000 1.11 D $50,000 1.45 a. b. c. d. What is the portfolio beta? What is the expected return on the portfolio if the risk-free rate is 0.75% and the market risk premium is 9.25%? If you sell stock D and invest half the proceeds to purchase additional shares of stock A and half the proceeds to purchase additional shares of stock B, what is the new portfolio beta? Assume the risk-free rate falls to 0.25% and the market risk premium falls to -1.5%, compare expected returns for the original portfolio (beta found in part a) and the rebalanced portfolio (beta found in part c). Beginning with the rebalanced portfolio, suppose you obtain $10,000 to invest in a new stock. While deciding which stock to add to the portfolio, you use the money to purchase T-bills. What is the resulting portfolio beta? e