Compute the Expected Return and Risk of a Portfolio?
The subsequent data are presented to you as a portfolio manager
|
Security
|
Expected Return
|
Beta
|
Standard Deviation
|
|
A
|
.30
|
2.0
|
.50
|
|
B
|
.25
|
1.5
|
.40
|
|
C
|
.20
|
1.0
|
.30
|
|
D
|
.18
|
0.8
|
.25
|
|
E
|
.15
|
0.5
|
.20
|
a. Draw out a security market line. In terms of the security market line, define which of the securities listed above are undervalued and with reason.
b. Supposing that a portfolio is constructed by using equal proportions of the five stocks listed above, compute the expected return and risk of such type of a portfolio.