Question: Please show all work and formula: Please use the information on the table below to answer this question. Security Actual Return Beta A 12% 1.2

Please show all work and formula:

Please use the information on the table below to answer this question.

Security Actual Return Beta

A 12% 1.2

B 10% 1.0

C 14% 1.4

  1. Assume the risk-free interest rate is 1% and the market risk premium is 5.5%. An investor would like to invest $40,000 in Security A, $25,000 in security B and $50,000 in Security C. Find the portfolios expected return.
  2. Find the portfolios actual return.
  3. Based on your answers to a and b, is the portfolios return higher or lower than required? How should prices react?

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