Question 2 Mickey is the manager of a portfolio of equities as shown below. Stock A B Investment $300,000 $300,000 $400,000 Beta 2.0 1.2 0.6 The risk free rate is 3% and the market risk premium is 7%. Mickey's best friend, Donald calls him and asks him to help evaluate the bonds of Goofy Limited as there may be a window of opportunity for arbitrage. The bonds have face value of $1,000 and pay 5% annual coupons. The bonds mature in 3 years with redemption at par. The yield to maturity is 15%. (a) Compute the beta and expected return of the portfolio. (6 marks) Propose one (1) possible method that Mickey can rebalance his portfolio if he expects the stock markets to rise in the next 6 months. (4 marks) Infer one (1) possible reason for Goofy Limited's bonds to trade at yield to maturity of 15%