Please show all work and formula:
Please use the information on the table below to answer thisquestion.
Security ActualReturn Beta
A 12% 1.2
B 10% 1.0
C 14% 1.4
- Assume the risk-free interest rate is 1% and the market riskpremium is 5.5%. An investor would like to invest $40,000 inSecurity A, $25,000 in security B and $50,000 in Security C. Findthe portfolio’s expected return.
- Find the portfolio’s actual return.
- Based on your answers to a and b, is the portfolio’s returnhigher or lower than required? How should prices react?
