Homework Questions: Week 7 Exercise 10.6 An investor's portfolio has 10,000 shares of Stock X with a market price of $1.50 per share and 20,000 shares of Stock Y with a market price of $0.75c per share. Stock X has a Beta value of 1.2 with an expected return of 12% and a STD(standard deviation) of 15%, and Stock Y has a beta value of 0.8 with an expected return of 7% and a standard deviation of 10%. The correlation between the two stocks is -0.2. The risk- free rate is 3% and the market risk premium is 5%. i) ii) Find the expected return, the standard deviation of returns, and the beta value for your investment portfolio with the two stocks. Assume that your investment period is 1 year, and you hold those shares for 1 year. What is the expected value of your investment portfolio at the end of your investment period according to the CAPM? Calculate Sharpe ratios for Stock X, Y, and your investment portfolio (P) respectively. Draw a graph with security's expected return on the vertical axis and security's standard deviation on the horizontal axis that shows Stock X, Y and your investment portfolio P and the 3 capital allocation lines formed by Stock X, Y, and your investment portfolio P respectively