Phua Chu Kang has few stocks in his portfolios and he required you to assess among these few stocks which are supposed to remain and to sell. His total portfolio is about RM150,000. Ribena stock: It's beta is 1.7 and it's expected return is 22%. Its portfolio is 45,000. Milo stock: It's beta and expected return is 1.2% and 15%. Its portfolio is only 20%. Maggie stock: It's beta and expected return is higher 1% than Milo stock and less than 10% from Ribena stock 15%. Required: a. Calculate the required rate of return for each of the stock by using the CAPM. (6 marks) b. Calculate the alpha for each of the stocks. (6 marks) C. Calculate the expected return of portfolio, beta portfolio, risk premium and slope without plotting the SML. (8 marks) d. From (b) assess each of the stocks. Advise Phua which stock(s) he should remain and sell. (4 marks)
