Portfolio risk & return. The 3-stock portfolio are proposed to you. Assume that the return on market (R_M) is 9.00%, and risk-free rate (T-Bill, or R_RF) is 1.20%. Note that, T-Bill has no relationship with any of these assets, and its standard deviation is zero.

Use table below to calculate risk and return of the portfolio.

Assets	Investment weight	Expected return	Standard Deviation	Correlation	Beta
Asset A	25.00%	32.00%	45.00%	CorrA,B = 0.60	1.21
Asset B	40.00%	24.00%	20.00%	CorrA,C = -0.45	1.07
Asset C	35.00%	16.00%	15.00%	CorrB,C = 0.24	0.56

Questions	Answers
1. Calculate expected return of portfolio with all 3 risky assets	Answer%
2. Calculate Standard deviation of portfolio with all 3 risky assets	Answer%
3. Assume you sell out Asset A, and replace it with T-Bill, using the same investment weight. Calculate expected return of portfolio of T-Bill and 2 risky assets (Asset B, and C)	Answer%
4. Assume you sell out Asset A, and replace it with T-Bill, using the same investment weight. Calculate Standard deviation of portfolio of T-Bill and 2 risky assets (Asset B, and C)	Answer%
5. Calculate beta of portfolio with all 3 risky assets	Answer
6. Use CAPM, calculate required rate of return of all 3 risky assets	Answer%
7. Assume you add a new asset, Asset D, into portfolio. You adjust your portfolio by investing in all 4 assets equally. Beta of Asset D is 1.00. Calculate beta of portfolio with all 4 risky assets	Answer
8. From question 7, use CAPM and calculate required rate of return of portfolio with all 4 risky assets	Answer