You must answer ALL the questions. (Total 100 marks) Question 1 Anna holds a portfolio comprising the following 3 stocks: X,Y and Z. (a) Determine the expected return of security X. (4 marks) (b) Calculate the return of Anna's portfolio. (4 marks) (c) Calculate the beta of Anna's portfolio. (4 marks) (d) To reduce the systematic risk of the portfolio, Anna is considering 3 securities to add to the portfolio. Security A has a beta of 0 , security B has a beta of 0.5 and Security C has a beta of 0.3. Discuss which security will be most effective in reducing the portfolio's systematic risk? How would portfolio expected return change (higher or lower) if you add this security? (8 marks) Read the information for 3 stocks X,Y and Z below. If your portfolio includes 35 percent of X,40 percent of Y and 25 percent of Z, answer the following questions: (a) Calculate the portfolio expected return. (7 marks) (b) Calculate the variance and the standard deviation of the portfolio. (5 marks) (c) If the expected T-bill rate is 3.80 percent, calculate the expected risk premium on the portfolio. (3 marks) (d) If the market index fund has the same expected return as your portfolio, without considering any transaction cost, would you consider selling your portfolio and investing the market index fund instead? Explain your thoughts