Question 3 (total of 20 marks): An investor holds a portfolio comprising three assets (or stocks) A, B and C. Refer to the below tables to answer the questions that follow. Assume that returns are effective annual rates: Variables Stock A Stock B Stock C 33% 40% 25% Stock return standard deviation 0.25 $ 55,000.00 0.33 35,000.00 0.22 10,000.00 Investment $ $ Assume the following information holds: Correlation coefficient of the returns between A & B 0.10 Correlation coefficient of the returns between A&C 0.35 Correlation coefficient of the returns between B & C -0.85 Question 3a (3 marks): What is the weight of each stock in the portfolio? Question 3b (3 marks): What is the expected return of the portfolio? Question 3c (4 marks): What is the variance of the portfolio? Question 3d (1 marks): What is the standard deviation of the portfolio? Question 3e (3 marks): Using the above table find the covariance of the returns between A & B, A & C and B & C? Question 3f (2 marks): Which combination of the stocks correlation coefficient will provide the maximum benefit of portfolio diversification? Explain your reasoning. Question 3g (2 marks): Assume the betas of stock A, B and C are 1.3, 1.0 and 1.8 respectively. What is the portfolio beta? Is the portfolio more or less risky than the market? Question 3h (2 marks): If the proportion of your money invested in stocks A, B and C are, 15%, 80% and 5% respectively, what is the portfolio expected return