Question 2 I. An investor holds a portfolio that consists of six stocks. His investment in each stock as well as each stock's beta is provided in the tables below: (6 marks) BETA COMMON STOCK (TICKER SYMBOL) Nanyang Business Systems (NBS) Yunnan Garden Supply, Inc. (YUWHO) Bird Nest Soups Company (SLURP) Wacho.com! (WACHO) Park City Cola Company (BURP) Oldies Records, Ltd. (SHABOOM) 1.40 0.80 0.60 1.80 1.05 0.90 Common stock (Ticker Symbol) NBS YUWHO SLURP WACHO BURP SHABOOM Investment $1000 $1500 S2000 $3000 $2500 $800 The risk-free rate is 5% and the market risk premium is 12.5%. a) What is portfolio's beta? b) Suppose you sell YUWHO and use the entire amount (i.e. $1500) in buying additional stock of SLURP. What will be the portfolio's new beta? c) What is the required rate of return of NBS stock