choose two other companies,look up their beta and report the names of these companies and their betas. suppose you invest one third of your money in each of the stocks of these companies. what will the beta portfolio be? given the data in (b), what will the expected rate of return on this portfolio be? do you feel that the three-stock portfolio is sufficiently diversified or does it still have risk that can be diversifies away? explain

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To find the beta values of two companies, we will need to look up their beta coefficients. Beta coefficients measure the sensitivity of a stock's returns to market movements. A beta coefficient of 1 indicates that the stock is expected to move in tandem with the market, while a beta coefficient above 1 suggests that the stock is more volatile than the market, and a beta coefficient below 1 indicates that the stock is less volatile.

Step 1: Choose two companies
Let's assume we choose Company A and Company B as the two companies for this example.

Step 2: Look up their beta values
To find the beta values of the selected companies, you can use financial websites or platforms that provide such information. One popular source is Yahoo Finance.

Look up the stock symbols or names of Company A and Company B on Yahoo Finance or another reliable financial source. Find the beta values listed for these companies.

For this example, assume Company A has a beta of 1.2 and Company B has a beta of 0.8.

Step 3: Calculate the beta portfolio
The beta portfolio is a weighted average of the beta coefficients of the individual stocks. Since you are investing one-third of your money in each stock, the calculations would be as follows:

Beta portfolio = (Weight A * Beta A) + (Weight B * Beta B)

Assuming equal weights:

Beta portfolio = (1/3 * 1.2) + (1/3 * 0.8)
= 0.4 + 0.2667
= 0.6667

Therefore, the beta portfolio would be 0.6667.

Step 4: Calculate the expected rate of return
To calculate the expected rate of return on the portfolio, you would need the expected returns of each stock and their corresponding weights.

Since the question does not provide this information, we cannot determine the expected rate of return on the portfolio using the given data.

Step 5: Assess diversification
Diversification aims to reduce the risk of a portfolio by combining investments that have low correlations with each other.

In this three-stock portfolio, if the beta portfolio is significantly lower than the beta of each individual stock, it suggests that diversification has occurred. The lower beta portfolio indicates a reduced sensitivity to market movements.

However, without knowing the specific beta values of the stocks or the expected returns, we cannot ascertain whether the three-stock portfolio is sufficiently diversified. The correlation between the individual stocks also plays a crucial role in determining the effectiveness of diversification.