$6-23.($Portfolio beta and security market line$)$ You own a portfolio consisting of the

stocks below:

STOCK OR SECURITY

PERCENTAGE OF

PORTFOLIO BETA EXPECTED RETURN

$120\%1\mathrm{.}0012\%$

$230\%0\mathrm{.}858\%$

$315\%1\mathrm{.}2012\%$

$425\%0\mathrm{.}607\%$

$510\%1\mathrm{.}6016\%$

The risk$-$free rate is $3$ percent. Also, the expected return on the market portfolio is

$11$ percent.

a$.$ Calculate the expected return of your portfolio. $($Hint: The expected return

of a portfolio equals the weighted average of the individual stocks$$ expected

returns, where the weights are the percentage invested in each stock.$)$

b$.$ Calculate the portfolio beta.

c$.$ Given the foregoing information, plot the security market line on paper. Plot

the stocks from your portfolio on your graph.

d$.$ From your plot in part $($c$),$ which stocks appear to be your winners and which

ones appear to be your losers?

e$.$ Why should you consider your conclusion in part $($d$)$ to be less than certain?