Question: QUESTION 2 (10 MARKS] Answer the questions below using the following information: Alcom Bismi Chance Expected Return 10% 13% 18% Standard Deviation 7% 10% 12%

QUESTION 2 (10 MARKS] Answer the questions below using the following

QUESTION 2 (10 MARKS] Answer the questions below using the following information: Alcom Bismi Chance Expected Return 10% 13% 18% Standard Deviation 7% 10% 12% Beta 0.8 1.2 2.0 Assume the yield-to-maturity of Government Investment Issue (GII) is 3% and the market risk premium is 6%. A. Calculate the required return for stocks Alcom, Bismi, and Chance. (6 marks) B. Assuming an investor with a well-diversified portfolio, which stock would the investor want to add to his portfolio? Explain. (2 marks) C. Assuming an investor who will invest all of his money into one security, which stock will the investor choose? Explain (2 marks)

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