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Compute the beta and expected return of mr lee fund

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Reference no: EM132877253

Mr Lee manages a fund which consists of 3 investments, namely, A, B and C. The information pertaining to the investments and the market are given below:

Investment         Amount        Beta

Stock A           $30,000         1.6

Stock B        $50,000              1.2

Stock C          $20,000          -0.2

Market Risk Premium = 6%

Risk Free Rate = 3%

Investors in Mr Lee's fund have complained that the fund's volatility is high. They are not comfortable with the relatively large fluctuations in the fund's value. Ms Lim, the analyst, suggests that the fund sells some of the high beta stocks and invests the proceeds in bonds.

Problem 1: Compute the beta and expected return of Mr Lee's fund.

Reference no: EM132877253

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