Exercise 3 Mr. White has $56400 and wants to take the following positions in these three stocks Stock $1 Number of Price Position shares 233 1000 short $2 53 109 10 2600 long 600 long The rates of return, the standard deviations, and the betas of the stocks are Stock $1 $2 53 Rate of Standard beta return deviation -12.49% 0.15 -1.95 13.14% 0.16 19 12.54% 0.15 1.24 The correlation coefficients are: Between S1 and S2= Between S1 and 53- Between $2 and $3 -0.59 0.41 0.32 1) Calculate the rate of return of the portfolio (5 pts) The risk-free rate is 4.08% Answer 2) Calculate the standard deviation of the portfolio (15 pts) Answers 3) Calculate the beta of the portfolio (5 pts) Answers Exercise 4 The prices per share of three companies now and one year ago are: Company L M S Price one Price now Number of shares year ago oustanding 117 232 7 million 110 295 6.5 million 104 207 6.3 million An index is composed of stocks L, M, and S. Calculate the return on the index if 1) The index is equally weighted (10 pts) Answer= 2) The index is value weighted (10 pts) Answer= 3) The index is price weighted (10 pts)