Portfolio risk & return. The 3-stock portfolio are proposed to you. Assume that the return on...

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Portfolio risk & return. The 3-stock portfolio are proposed to you. Assume that the return on market (R) is 11.40 %, and risk-free rate (T-Bill, or Rap) is 1.20%. Note that, T-Bill has no relationship with any of these assets, and its standard deviation is zero. Use table below to calculate risk and return of the portfolio. Assets Asset A Asset B Asset C Investment weight 35.00% 45.00% 20.00% Expected return 30.00% 24.00% 16.00% Standard Deviation 45.00% 20.00% 15.00% Correlation Corr=0.60 AB Corr -0.45 A.C CorrB.C = 0.25 Beta 1.21 1.17 0.65 Questions 1. Calculate expected return of portfolio with all 3 risky assets 2. Calculate Standard deviation of portfolio with all 3 risky assets 3. Assume you sell out Asset A, and replace it with T-Bill, using the same investment weight. Calculate expected return of portfolio of T-Bill and 2 risky assets (Asset B, and C) 4. Assume you sell out Asset A, and replace it with T-Bill, using the same investment weight. Calculate standard deviation of portfolio of T-Bill and 2 risky assets (Asset B, and C) 5. Calculate beta of portfolio with all 3 risky assets (round to 2 digits after decimal). 6. Use CAPM, calculate required rate of return of all 3 risky assets. 7. Use CAPM, assume you add a new asset, Asset D, into portfolio. You adjust your portfolio by investing in all 4 assets, and each with equal weight of investment. Beta of Asset D is 0.24. Calculate beta of portfolio with all 4 risky assets. 8. From question 7, use CAPM and calculate required rate of return of portfolio with all 4 risky assets. Answers % % % % % % Portfolio risk & return. The 3-stock portfolio are proposed to you. Assume that the return on market (R) is 11.40 %, and risk-free rate (T-Bill, or Rap) is 1.20%. Note that, T-Bill has no relationship with any of these assets, and its standard deviation is zero. Use table below to calculate risk and return of the portfolio. Assets Asset A Asset B Asset C Investment weight 35.00% 45.00% 20.00% Expected return 30.00% 24.00% 16.00% Standard Deviation 45.00% 20.00% 15.00% Correlation Corr=0.60 AB Corr -0.45 A.C CorrB.C = 0.25 Beta 1.21 1.17 0.65 Questions 1. Calculate expected return of portfolio with all 3 risky assets 2. Calculate Standard deviation of portfolio with all 3 risky assets 3. Assume you sell out Asset A, and replace it with T-Bill, using the same investment weight. Calculate expected return of portfolio of T-Bill and 2 risky assets (Asset B, and C) 4. Assume you sell out Asset A, and replace it with T-Bill, using the same investment weight. Calculate standard deviation of portfolio of T-Bill and 2 risky assets (Asset B, and C) 5. Calculate beta of portfolio with all 3 risky assets (round to 2 digits after decimal). 6. Use CAPM, calculate required rate of return of all 3 risky assets. 7. Use CAPM, assume you add a new asset, Asset D, into portfolio. You adjust your portfolio by investing in all 4 assets, and each with equal weight of investment. Beta of Asset D is 0.24. Calculate beta of portfolio with all 4 risky assets. 8. From question 7, use CAPM and calculate required rate of return of portfolio with all 4 risky assets. Answers % % % % % %

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Answer To calculate the risk and return of the given portfolio well use the information provided in the table Lets solve each question step by step 1 Calculate expected return of the portfolio with al... View the full answer