1. The following table presents the three-stock portfolio.

Stocks Portfolio Coefficient Expected Standard

Weight Beta return deviation

A 0.25 0.50 0.40 0.07

B 0.25 0.50 0.25 0.05

C 0.50 1.00 0.21 0.07

The variance of the market returns is 0.06.

1. What is the Beta coefficient of the portfolio? (1 mark)
2. What is the expected rate of return on the portfolio? (1 mark)
3. What is an actual variance of the portfolio, if the following actual covariance between the stocks returns is given: (1 mark)

Cov (rA, rB) = 0.020

Cov (rA, rC) = 0.035

Cov (rB, rC) = 0.035