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QUESTION 3 (20 marks) You are a reputable fund manager who manages Equity Excellent Fund. This objective of this Equity Excellent Fund is to invest in high risk global and local equities with the aim to generate competitive expected return. However, due to the high unemployment rate in the U.S. and pessimistic economic outlook, a recession is expected to happen next year. Now, you plan to change your investment strategy to reduce the beta of the stocks that you manage under the Equity Excellent Fund to 1.2. The fund size of the Excel Equity Fund is RM9 million and currently, the current beta of this fund is 1.8. Now is December 2019 and the Kuala Lumpur Composite Index (KLCI) is standing at 1589 points. (a) What risk do you face when you hold a portfolio in the stock market? Explain how you can reduce the risk you face without trading the stocks physically in the stock market. (6 marks)