An Investor Is Considerinq the Three Equities Given Below Calculate the Expected Return and Beta of a Portfolio Equally

question 38

Essay

An investor is considerinq the three equities given below:
$\begin{array} { | l | l | l | } \hline \text { Equity } & \text { Expected Return } & \text { Beta } \\\hline \text { A } & 6.0 \% & - 0.10 \\\hline \text { B } & 13.3 \% & 2.10 \\\hline \text { C } & 9.2 \% & 0.75 \\\hline \text { Market Portfolio } & 10.0 \% & 1.00 \\\hline \text { T-Bills } & 7.0 \% & 0.00\end{array}$
Calculate the expected return and beta of a portfolio equally weighted between equities B and C. Demonstrate that holding equity A actually reduces risk by comparing the risk of a portfolio equally weighted between equity B and T-Bills with a portfolio equally weighted between equity B and A.

---

Definitions:

Abraham Maslow

An American psychologist best known for creating Maslow's hierarchy of needs, a theory of psychological health predicated on fulfilling innate human needs in priority, culminating in self-actualization.

Personality Theorists

Scholars and researchers who study and develop theories about the psychological traits and mechanisms that make up individual personalities.

Childrearing

The practices, strategies, and methods used by caregivers to support and promote the development of a child.

Individualist Cultures

Societies that emphasize the importance of personal independence and individual achievement over collective goals or group cohesion.