Question 2 (Show calculations)

The expected returns for securities A, B and C are listed below:

Security A Security B Security C

Expected returns 12% 18% 9%

Assuming the risk-free rate of 3% and market premium of 6%:

Required:

2.1. What are the betas for the three securities? [4]

2.2. For a portfolio consisting of 20% of security A, 45% of security B, and 35%, determine the portfolios expected return and beta. [6]