Answer to Question #295755 in Financial Math for james

Question

1 32 2.10 50

2 30 1.80 35

3 25 1.65 42

4 20 1.30 26

5 18 1.15 29

6 15 0.85 18

7 14 0.75 20

8 12 0.50 17

Market 16 1.00 25

Index

Govt security 7.5 0 0

a. In terms of security market lines, which of the securities listed above are undervalued? (3mks)

b. Assuming that a portfolio is constructed investing equal proportion of funds in each of the above securities, what is the expected return and risk of such a portfolio? (3mks)