Investment Beta Stock A $1,600 0.85 Stock B $800 1.5 Risk-free return Market Data Type 3% Market return 8.00% a. What is the expected return of each stock and what is the expected return of market portfolio? Stock A Stock B Market Score Expected return 0 b. What is the expected return of your investment portfolio? Expected return 0 c. In addition to previous investments you decided to invest in a risk-free security. What is the beta 0 Stock A $1,600 0.85 Investment Beta Stock B $800 1.5 Risk-free $600 New portfolio beta d. Suppose you observe stock C's beta and observed historical average return as given below. What theoretical return (based on CAPM)? Should you buy or sell stock C? Explain. Stock C Beta 1 Observed average return 6.00% 0 Theoretical return Your recommendation (Buy or sell?) Explain