Question

Section 2 (15 Marks) [CLO 2] Short exercises Exercise 1: Calculate the expected return of the folwingprlios (6 Marks) Portfolio Aipha tfolios: (6 Marks) Probability Expected security Security 1 Security 2 Security3 Security4 Security 5 0.2 0.15 0.35 0.25 0.05 return 0.13 0.56 0.78 0.26 0.82 Porttolio Beta Probability Expected security return 0.13 Security1 Security 2 Security3 Security 4 Security 5 0.2 0.1 0.3 0.2 0.2 0.56 0.78 0.26 0.82 Portfolio Zeba Probability Expected security return Security 1 Security 2 Security 3 Security 4 Security 5 0.2 0.1 0.25 0.25 0.2 0.13 0.56 0.78 0.26 0.82

Answer 1

Portfolio Alpha Security Security Return Probability Er ted Return 0.20 0.15 0.35 0.25 0.05 Se 0.13 0.56 0.78 0.26 0.82 0.0260 0.0840 0.2730 0.0650 0.0410 Se Se Total 1.00 0.4890 ected Return-Alpha 48.90% Portfolio Beta Security Securitv Return Probability Er ted Return 0.13 0.56 0.78 0.26 0.82 0.20 0.10 0.30 0.20 0.20 0.0260 0.0560 0.2340 0.0520 0.1640 Security 4 Total 1.00 0.5320 Expected Return-Beta = 53.20%

Portfolio Zeba Securitv Securitv Return Probabilitv Er ted Return 0.13 0.56 0.78 0.26 0.82 0.20 0.10 0.25 0.25 0.20 0.0260 0.0560 0.1950 0.0650 0.1640 Se Security 4 Total 1.00 0.5060 Expected Return-Zeta = 50.60%