Question 5 :

Question 5 10 Points (a) What are the main principles of (Markowitz) portfolio theory? How does the risk-free lending and borrowing extend the range of investment possibilities in relation to the efficient portfolio on the efficient frontier)? (b) Details of the shares held in a portfolio are given below: Securities Expected Return Percentage held Share A Share B Share C Treasury Bill Beta (B) 1.1 0.8 1.7 0 14% 10% 18% 2% 26% 18% 31% 25% Calculate the expected return and beta of this portfolio. How does the risk of this portfolio compare with that of the market portfolio