Portfolio H consists of 4 stocks, namely A, B, C, and D. The information pertaining to...

      

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Portfolio H consists of 4 stocks, namely A, B, C, and D. The information pertaining to the stocks, the portfolio and the market are given below: Stock Investment Beta ABCD $10,000 0.8 $20,000 1.0 $30,000 not available $40,000 1.2 Portfolio H $100,000 1 Expected return of the market = 8% Risk-free rate=3% (a) (i) Compute the beta of Stock C. (ii) Compute the expected return of Portfolio H. (5 marks) (b) Suppose you sell all $20,000 invested in Stock B and use the proceeds to invest in Stock D. Calculate the beta and the expected return of the new Portfolio H. (5 marks) (c) Discuss a likely circumstance where you would sell a stock with a low beta and invest the proceeds in a stock with a high beta, as in part (b)? (5 marks) Portfolio H consists of 4 stocks, namely A, B, C, and D. The information pertaining to the stocks, the portfolio and the market are given below: Stock Investment Beta ABCD $10,000 0.8 $20,000 1.0 $30,000 not available $40,000 1.2 Portfolio H $100,000 1 Expected return of the market = 8% Risk-free rate=3% (a) (i) Compute the beta of Stock C. (ii) Compute the expected return of Portfolio H. (5 marks) (b) Suppose you sell all $20,000 invested in Stock B and use the proceeds to invest in Stock D. Calculate the beta and the expected return of the new Portfolio H. (5 marks) (c) Discuss a likely circumstance where you would sell a stock with a low beta and invest the proceeds in a stock with a high beta, as in part (b)? (5 marks)