Corporate Financial Management Portfolio Theory 11 a Suppose you observed that high level managers make superior returns on investments in their companys stock Would this be a violation of weak form efficiency strong form market efficiency (30 ) Your portfolio consists solely of 40 of security A, 15 of security B, and 45 of security C Security A has a beta of 1 16, security B has a beta of 1 47, and security C has a beta of 0 42 What is the beta of your portfolio (30 ) Your friend Matthew has inherited 100,000 and would like to invest it in the stock market Given his love of Apple technology, he has decided that he will invest all 100,000 in shares of Apple Inc You recently spent a number of weeks in your finance class learning about risk and expected return and know that this is not a wise investment strategy Explain in detail to Matthew why his planned investment decision is not optimal and make a recommendation as to what he could do in order to improve the risk return profile of his portfolio (40 )

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Corporate Financial Management:Portfolio Theory 11. a. Suppose you observed that high-level managers make superior returns on investments in their companys stock. Would this be a

Corporate Financial Management:Portfolio Theory

11. a. Suppose you observed that high-level managers make superior returns on investments in their companys stock. Would this be a violation of weak form efficiency? strong-form market efficiency? (30%)

Your portfolio consists solely of 40% of security A, 15% of security B, and 45% of security C. Security A has a beta of 1.16, security B has a beta of 1.47, and security C has a beta of 0.42. What is the beta of your portfolio? (30%)
Your friend Matthew has inherited 100,000 and would like to invest it in the stock market. Given his love of Apple technology, he has decided that he will invest all 100,000 in shares of Apple Inc. You recently spent a number of weeks in your finance class learning about risk and expected return and know that this is not a wise investment strategy. Explain in detail to Matthew why his planned investment decision is not optimal and make a recommendation as to what he could do in order to improve the risk/return profile of his portfolio. (40%)