a) You have three portfolios containing four assets each. The following table specifies the weights assigned to each asset in each of the three portfolios, along with each assets beta: Portfolio Weights Asset Asset Beta Portfolio A Portfolio B Portfolio C 1 1.5 30% 5% 35% 2 1.8 40% 15% 5% 3 0.3 20% 30% 40% 4 -0.4 10% 50% 20% Total 100% 100% 100%

(i) Calculate the betas for the three portfolios.

(ii) If the risk-free rate is 2% and the market return is 7%, calculate the required return for each portfolio using the CAPM.

(iii) Assume that you believe that each of the four assets will earn the return shown in the table below. Based on these figures and the portfolio weights, calculate the portfolio returns of Portfolios A and B separately. Asset Return 1 16.5% 2 12.0% 3 15.0% 4 7.0% (8 marks) b) An investor invests some of her wealth in Netflix stock with an expected rate of return of 15%. The rest of her wealth is invested in the U.S. Treasury Bill (T-bill), which yields 6%. The expected return and standard deviation of her portfolio are 9.6% and 8%, respectively. What is the standard deviation of the Netflix stock?