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Consider a portfolio consisting of the following three stocks: The volatility of the market portfolio is 10% and it has an expected return of 8%.
Consider a portfolio consisting of the following three stocks: 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). ... a. Compute the beta and expected return of each stock. (Round to two decimal places.) Portfolio Weight (A) 0.25 Volatility (B) 11% Correlation (C) 0.43 Beta (D) Expected Return (E) % HEC Corp Green Widget Alive And Well 0.36 26% 0.64 % 0.39 15% 0.45 % Data table b. Using your answer from part (a), calculate the expected return of the portfolio. The expected return of the portfolio is %. (Round to two decimal places.) (Click on the following icon in order to copy its contents into a spreadsheet.) c. What is the beta of the portfolio? The beta of the portfolio is (Round to three decimal places.) HEC Corp Green Widget Alive And Well Portfolio Weight 0.25 0.36 0.39 Volatility 11% 26% 15% Correlation with the Market Portfolio 0.43 0.64 0.45 d. Using your answer from part (c), calculate the expected return of the portfolio and verify that it matches your answer to part (b) The expected return of the portfolio is %. (Round to two decimal places.)
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