Question
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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