1. Suppose you created a two-stock portfolio by investing Rupees 50,000 in Nescom and Rupees 50,000 in Nawab. Now Calculate the expected return of portfolio, the standard deviation of portfolio and the coefficient of variation of portfolio. Also about how the riskiness of this two-stock portfolio compares with the riskiness of the individual stocks if they were held in isolation?
2. Assume that the expected rates of return and the beta coefficients of the alternatives supplied by an independent analyst are as follows

• What is a beta coefficient, and how are betas used in risk analysis?
• Do the expected returns appear to be related to each alternative's market risk?
• Is it possible to choose among the alternatives on the basis of the information developed thus far?

1. Assumes that the risk-free rate is 3.0%, and risk premium is expected return on market portfolio less risk.

• Write out the security market line (SML) equation; use it to calculate the required rate of return on each alternative?
• How do the expected rates of return compare with the required rates of return? Identify the undervalued companies?

Security Nescom , Market ,Pk_Steel, T_Bills , Nawab

Estimated rate of returns 5.00% , 4.00% , 3.50% , 3.00% ,1.00%

Beta 1.5 , 1 ,0.75 , 0 , -0.6