Question 3: Portfolio Beta and Expected Return (10 marks) In reference to the portfolio information presented below, answer the following questions. Portfolio Portfolio 1 Portfolio 2 Portfolio 3 Weighting in Stock K 25% 30% 10% Weighting in Stock L 25% 40% 20% Weighting in Stock M 25% 20% 40% Weighting in Stock N 25% 10% 30% a) The betas of the above four stocks, K, L, M, and N are 0.65, 0.9, 1.25, and 1.55, respectively. Calculate the beta for each of the portfolio in the above table given the weights in each asset as presented in the table. Show all work and formula(s) clearly. Specify the type of risk (i.e. systematic or unsystematic) beta is generally used to measure. (4 marks) IE Click here to enter text. b) Calculate the expected returns of the four individual assets and the three portfolios, if the current Security Market Line (SML) is plotting with an intercept of 1.25% (risk-free rate) and a market premium of 11.25% (slope of the line). Show all work and formula(s) clearly. (4 marks) Click here to enter text. c) Based on your calculations on portfolios in parts (a) and (b) above, what risk and (expected) return relationship do you observe? Use relevant figures to demonstrate your answer. Briefly comment whether your observation is consistent with the conceptual relationship of risk and expected return. (Word limit: 100 words (answers beyond word limit will not be marked.) (2 marks) Click here to enter text