Consider a portfolio consisting of the following three stocks:

	Portfolio Weight	Volatility	Correlation with the Market Portfolio
HEC Corp	0.26	10%	0.37
Green Widget	0.33	20%	0.55
Alive And Well	0.41	12%	0.49

.

The volatility of the market portfolio is

10%

and it has an expected return of

8%.

The risk-free rate is

3%.

a. Compute the beta and expected return of each stock.

b. Using your answer from part

a,

calculate the expected return of the portfolio.

c. What is the beta of the portfolio?

d. Using your answer from part

c,

calculate the expected return of the portfolio and verify that it matches your answer to part

b.

Question content area bottom

Part 1

a. Compute the beta and expected return of each stock. (Round to two decimal places.)

	Portfolio Weight (A)	Volatility (B)	Correlation (C)	Beta (D)	Expected Return (E)
HEC Corp	0.26	10%	0.37	enter your response here	enter your response here%
Green Widget	0.33	20%	0.55	enter your response here	enter your response here%
Alive And Well	0.41	12%	0.49	enter your response here	enter your response here%