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Given the following market values of stocks in your portfolio and their expected return and risk status. Determine the following : Stock Market Value (RM)

Given the following market values of stocks in your portfolio and their expected return and risk status. Determine the following :

Stock

Market Value (RM)

Expected return

Systematic risk

Unsystematic risk

(standard deviation)

Allkey (A)

15,000

14%

1.5

6%

Burnmark (B)

17,000

-12%

0.9

4%

Crossfire (C)

18,000

18%

2

9%

a) calculate the Portfolio return

b) Portfolio risk assuming correlation coefficient between A and B is -0.7, between A and C is 0.15 and between B and C is -0.25.

c) Required return on the portfolio by using CAPM model and assuming expected market return is 8% and average treasury bills are 4%.

d) Based on portfolio return against required return, does your portfolio meet its requirement? Briefly explain why.

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