Question
Question 12 continued b) Please comment on the relation between risk and return of the individual stocks that you calculated in part a). (7
Question 12 continued b) Please comment on the relation between risk and return of the individual stocks that you calculated in part a). (7 marks) c) Using the results in part a), calculate the beta for the assets in the above table and provide the interpretation of beta for the three stocks. (4 marks) d) Indicate which stocks are undervalued and which are overvalued and provide the reason why you reach that conclusion. (7 marks) e) Construct an equally-weighted portfolio composed of HP-Technology and CounterMarket & Co. stocks. Using the information provided in the above table, calculate the expected return and volatility of this portfolio. Comment on the results and the possible ways to diversify a portfolio. (6 marks) f) Now construct a new portfolio composed of 70% of HP-Technology stock and 30% of Market Portfolio. Calculate expected return and volatility of this portfolio. Compare this combination with the portfolio in part e) and explain which one is better. (7 marks) (TOTAL 35 MARKS)
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