20. You have a portfolio of the following four shares:

Share | Beta | Investment | A | 0.80 | 100,000 | B | 1.25 | 100,000 | C | 1.00 | 075,000 | D | 0.60 | 125,000 |

What is the expected rate of return on your portfolio if the risk-free rate of return is 9 per cent and the expected market rate of return is 16 per cent?

21. In year I, Mr. Suresh bought two stocks A and 13 (face value Rs.IO each) in large numbers in the open market at the then prevailing price. After five years, he would like to know the performance of these two stocks in terms of their annual returns vis-a-vis the market. Also, he would like to know whether to hold these two stocks or not. Hence he approached you to seek your advice as a security analyst.
The following information has been gathered by you from the research department. The price and dividend details for these two stocks are:

Year(s) | Beginning Price (BP) ` | Ending Price (EP) ` | Dividends ` | | A | B | A | B | A | B | 1 | 280 | 160 | 340 | 120 | 2.50 | 2.00 | 2 | 340 | 120 | 320 | 170 | 3.00 | 2.00 | 3 | 320 | 170 | 420 | 250 | 3.50 | 2.00 | 4 | 420 | 250 | 370 | 180 | 3.50 | 2.00 | 5 | 370 | 180 | 410 | 260 | 4.00 | 2.00 |

The market returns for the said period’s are 30%, -17%, 28%, -5%, and 24% respectively.

Required: a. Calculate mean annual return and standard deviation for stocks A and 13 and the market. b. Calculate beta for stocks A and B. c. Calculate alpha for stocks A and B. d. Give your advice to Mr. Suresh regarding whether he has to hold these stocks or not. 22. An analyst at Revamp Securities Ltd. has made risk and return projections for the securities of Reliance and Hindalco, which are as follows:

Scenario | Probability | Return on Reliance (%) | Return on Hindalco (%) | Market Return (%) | 4% GDP growth | 0.30 | 3 | 2 |