$($Security market line$)$ You are considering the construction of a portfolio comprised of equal investments in each of four different stocks. The betas for each stock are found below:

$($Click on the icon $.$ in order to copy its contents into a spreadsheet.$)$

a$.$ What is the portfolio beta for your proposed investment portfolio?

b$.$ How would a $25$ percent increase in the expected return on the market impact the expected return of your portfolio?

c$.$ How would a $25$ percent decrease in the expected return on the market impact the expected return on each asset?

d$.$ If you are interested in decreasing the beta of your portfolio by changing your portfolio allocation in two stocks, which stock would you decrease and which would you increase?

Why?

a$.$ The portfolio beta for your proposed investment portfolio is

$($Round to three decimal places.$)$

b$.$ A $25\%$ increase in the expected return on the market will cause the expected return of your portfolio to

by $\%.($Select from the drop$-$down menu and round the answer

to two decimal places.$)$

c$.$ A $25\%$ decrease in the expected return on the market will have the following impact on the expected return on each asset:

Asset A would

by $\%.($Select from the drop$-$down menu and round the answer to two decimal places.$)$

Asset B would

by $,\%.($Select from the drop$-$down menu and round the answer to two decimal places.$)$

Asset C would

by

$\%.($Select from the drop$-$down menu and round the answer to two decimal places.$)$

Asset D would

by

$\%.($Select from the drop$-$down menu and round the answer to two decimal places.$)$

d$.$ If you are interested in decreasing the beta of your portfolio by changing your portfolio allocation in two stocks, which stock would you decrease and which would you increase?

Why? $($Select the best choice below.$)$

A$.$ You should increase asset A and decrease asset $D$ because asset $D\text{'}$s beta is negative and asset A has the highest beta.

B$.$ You should increase asset $D$ and decrease asset A because asset $D\text{'}$s beta is negative and asset A has the highest beta.

C$.$ You should decrease asset $D$ and increase asset A because asset $D\text{'}$s beta is negative and asset A has the highest beta.

D$.$ You should increase asset $B$ and decrease asset $C$ because asset B$\text{'}$ beta is close to $1$ and asset C$\text{'}$s beta is the closest to zero.