The Ican Fund is a broad-based fund of stocks and other securities with an expected return of 8% and a volatility of 33%. As of now, the risk-free rate is 2%. Your broker suggests that you add a small amount of a new VC fund to your current portfolio. The VC fund has an expected return of 21% and a volatility of 76%. It has a correlation of 0.19 with the Ican Fund. Should you add the VC fund to your portfolio? Explain.

Assume that the Ican Fund is the market portfolio. Please respond to each segmented question below:

I. What is the beta of the VC fund with respect to the Ican Fund?

II. Given the beta, what return should you expect to get on the VC fund assuming the CAPM holds?

III. What return do you expect to get? Is this return better than the beta-based return?