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Please provide detailed answers on how you calculate answers. Using the following information to complete the problem: Assume the risk-free rate (RF) is 4 percent
Please provide detailed answers on how you calculate answers. Using the following information to complete the problem: Assume the risk-free rate (RF) is 4 percent and the required return on the market portfolio (m) is 13 percent. Stock Percentage of Portfolio Beta (6) Expected Return 1 40% 1.00 12% 2 25% 0.75 13% 3 35% 1.50 15% Part a, Find the expected return for the portfolio. Hint: Expected return is a weighted average return. (5 points) Part b. Using the same information above, find the beta for the portfolio. Hint: Portfolio beta is a weighted average beta (5 points) Part c. Using the same information above, find the required rate of return for the portfolio. Hint: the required rate of return of a stock based portfolio is based on CAPM/SML. (5 points) Part d, Please comment on the portfolio's expected rate of return and required rate of return. (Hint: using SML, above or below the line). (5 points)
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