Question
Consider the following portfolio: Share 1: Percentage of Portfolio 40% Beta 1.00 Expected Return 12% share 2: Percentage of Portfolio 25% Beta 0.75 Expected Return
Consider the following portfolio:
Share 1: Percentage of Portfolio 40% Beta 1.00 Expected Return 12%
share 2: Percentage of Portfolio 25% Beta 0.75 Expected Return 11%
share 3: Percentage of Portfolio 35% Beta 1.30 Expected Return 15%
(a) Calculate the expected return of the portfolio. (3 marks)
(b) Calculate the beta of the portfolio. (3 marks)
(c) Define systematic risk and unsystematic risk. (4 marks)
(d) Explain why systematic risk is the relevant risk in a diversified share portfolio. (4 marks)
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Financial Institutions Management A Risk Management Approach
Authors: Anthony Saunders, Marcia Millon Cornett
9th edition
1259717771, 1259717772, 9781260048186, 1260048187, 978-1259717772
