Question 3 (a) As an investment analyst, you developed following expectations about stocks A and B. To enjoy diversification, you decided to invest your capital in A and B by 40-60 percent respectively. Expected return Year Stock A Stock B 2022 2023 2024 2025 14% 14 16 20% 18 16 14 12 10 2026 2027 17 17 19 Required: (1) Estimate expected return of portfolio for whole period of 2022-2027. (8 marks) (11) Estimate standard deviation of portfolio return over the whole period. (4 marks) (111) Estimate coefficient of variation for each alternative over whole period. (4 marks) (iv) Based on your above answer, if you decide to invest in only one of above stocks, which alternative do you choose? Why? (2 marks) (b) What is the beta for an asset with a required return of 15% when the risk-free rate and market return are 3% and 15%, respectively? (4 marks) (c) What is the main benefit of debt financing over equity financing? (3 marks) [Total: 25 Marks]