Consider a portfolio consisting of the following three stocks:
Portfolio Weight Volatility the Market Portfolio HEC Corp 0.25 12% 0.4 Green Midget 0.35 25% 0.6 Alive And Well 0.4 13% 0.5 The volatility of the market portfolio is 10% and it has an expected return of 8%. The risk-free rate is 3%. a. Compute the beta and expected return of each stock. b. Using your answer from part a calculate the expected return of the portfolio. c. What is the beta of the portfolio? d. Using your answer from part c calculate the expected return of the portfolio and verify that it matches your answer to part b.