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Question 4. Risk and return Your broker has given you a choice of three securities to add to your portfolio. You need to decide which

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Question 4. Risk and return Your broker has given you a choice of three securities to add to your portfolio. You need to decide which security is the best security to add to your portfolio. The risk free rate is 3% and the return on the market is 10%. The broker has told you the following: Beta 1.7 Security A B Expected Return 14% 3.25% 2% 0 -0.25 Formulas are provided on the last pages of this question booklet. Required: Which securities should you invest in? Justify your answer. Show your workings. TOTAL: 10 MARKS

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