Question 2: Portfolio Return and Beta Jamie Peters a recent graduate of an investment program has invested $100,000 to set-up the following portfolio one year ago: Table 1: Investment Performance Data Asset Cost Beta at Purchase Yearly Income Value today A $20,000 0.80 $1,600 $ 20,000 B 35,000 0.95 1,400 36,000 C 30,000 1.50 - 34,500 D 15,000 1.25 375 16,500 Certain parameters are required to assess the performance of this portfolio; he has therefore decided to compute the following using the information provided in the table above. Required: a.) Calculate the portfolio beta based on the original cost figures. b.) Calculate the percentage return of each asset in the portfolio for the year. c.) Calculate the percentage return of the portfolio based on original cost, using income and price gains during the year. d.) At the time Jamie made his investments, investors were estimating that the general market return for the coming year would be 10%. The estimate of the risk-free rate of return averaged 4% for the coming year. Calculate an expected rate of return for each stock based on its beta and the expectations of market and risk-free returns. e.) Based on the actual results obtained, explain how each stock in the portfolio performed relative to those CAPM-generated expectations of performance in (d) above. What factors could explain these differences?