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Your current investment portfolio consists of the following: Security Stock 1 Stock 2 Risk-free Deposit Investment $ 10,000 6,000 4,000 Expected Return 8.0% 4.0% 1.0%

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Your current investment portfolio consists of the following: Security Stock 1 Stock 2 Risk-free Deposit Investment $ 10,000 6,000 4,000 Expected Return 8.0% 4.0% 1.0% Beta 1.2x 0.8x 0.4x Required (a) (2 marks) What is the expected portfolio return? (b) (3 marks) If the average market return is 5%, what is the required retum of this portfolio? (0) (1 mark) Based on your results in parts (a) and (b), would you be willing to keep this portfolio? Explain (Marks will be awarded on the basis of your explanation.) (d) (3 marks) Define the concept of Beta as it relates to security pricing. (e) (1 mark) Is this portfolio in equilibrium"? Explain (Marks will be awarded on the basis of your explanation.)

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