$($Security market line$)$

a$.$ Determine the expected return and beta for the portfolio in the popup window: $.$ From your plot above, which stocks appear to be your winners and which ones appear to be losers?

Stock $1$ is a

$($Select from the drop$-$down menu.$)$

Stock $2$ is a

$($Select from the drop$-$down menu.$)$

Stock $3$ is a

$($Select from the drop$-$down menu.$)$

b$.$ Given the foregoing information, draw the security market line and show where the securities and portfolio fit on the graph. Assume that the risk$-$free rate is $3$ percent and that the expected return on the market

portfolio is $7$ percent. How would you interpret these findings?

a$.$ What is the expected return of the portfolio?

$\%($Round to two decimal places.$)$

What is the beta of the portfolio?

$($Round to two decimal places.$)$

b$.$ The security market line has a positive slope, the y intercept of the security market line is equal to the risk$-$free rate, and the slope of the security market line is equal to the difference between the required return

for the market and the risk$-$free rate. Since the risk$-$free rate is $3$ percent and the expected return on the market portfolio is $7$ percent, the security market line should look like the red line in the following graph:

Data table

$($Click on the following icon in order to copy its contents into a spreadsheet.$)$

From your plot above, which stocks appear to be your winners and which ones appear to be losers?