There are three possible scenarios for the economy over the next year, Below Average, Average, or Above Average. The possible returns on two stocks, on the stock market, and on Treasury Bills under the different scenarios are given below:

a. What is the beta of a portfolio that has $2000 invested in stock 1, $4500 invested in stock 2, and $3000 invested in Treasury Bills?

b. If you invest in a portfolio of just the two stocks (i.e. no T-Bills), what proportion of your money should be invested in each stock in order for your portfolio to have the same level of systematic risk as the stock market on average

5. There are three possible scenarios for the economy over the next year, Below Average Average, or Above Average. The possible returns on two stocks, on the stock market, and on Treasury Bills under the different scenarios are given below: 12 Marks Economy obability Stock I Return to T-Bills 4% Stock 2 return to Stock market 0% retum Above Average Average Below Average 0.3 2% 0.4 9% 12% 4% 10% 0.3 10% 22% 4% 20% a. What is the beta of a portfolio that has $2000 invested in stock 1, $4500 invested in stock 2, and S3000 invested in Treasury Bills? b. If you invest in a portfolio of just the two stocks (i.e. no T-Bills), what proportion of your money should be invested in each stock in order for your portfolio to have the same level of systematic risk as the stock market on average