Portfolio required stocks with the following investments and betas: The "risk" is the likelihood the investor could lose money. ( 3) value of an ordinary annuity and the present value of a lumpsum. Recall that the bond pricing formula is nothing but the sum of the present. rGTX = 5% + [(14% - 5%) .85] = 12.65% remain unchanged. What is the Var(rA) = σA2 =0.40 x (30 - 6)2 + 0.60 x (-10 - 6)2 = 384, Var(rB) = σB2 =0.40 x (-5 - 13)2 + 0.60 x (25 -13)2 = 216 The term "risk and return" refers to the potential financial loss or gain experienced through investments in securities. expected return for their exposure to macro risk, based on both the sensitivity to that risk (beta) as well as the compensation for bearing each unit of that source of risk (i.e., the risk premium, RPM), but are not rewarded for exposure to firm-specific uncertainty (the residual term ei in equation 11.1). 9.6 Portfolio Expected Return and Risk 9/21 9.7 Practical Considerations in Measuring Risk 9/31 9.8 Estimating Portfolio Value at Risk 9/31 Learning Summary 9/34 Appendix to Module 9: Example of the Statistical Analysis of Risk 9/35 Review Questions 9/38 Case Study 9.1: Calculating the Risk Factors for Two Commodities 9/43 # of Stocks Deviation of Annual Standard Deviation (continued from previous Lecture Notes): Consider a portfolio with 80% invested in Ford and the remaining 20% invested in T-bills. 4. Fin.&Bank, BBA Fin. What return should you require from an investment in GTX? Return = 1100 – 1000 / 1000 = 10%,  The quantification of risk and return is a crucial aspect of modern finance. Academic year. – The difference between the return on riskier stock investments and government securities is called the equity risk premium. Davis Pham. Expected return: return expected to be realized, which is always positive Realized return: actual return received, which can be either positive or negative Measuring the stock market: DJIA, S&P 500 index, NASDAQ composite index Realized S&P 500 total returns, 1968 - 2012 There is a positive relation between expected return and risk E(R) Risk  B. Variances YTM immediately rises to 14% and remains at 14% until the horizon. return $40,000 invested in a  rP = .50 x rA + .50 x rB = 9.5% is 13 percent. Lecture notes on risk management, public policy, and the financial system Value-at-Risk Allan M. Malz Columbia University. ... Introduction to Risk and Return. Risk and Return: Past and Prologue. 1 Sources of Return An investor in a fixed-rate bond earns a return from three sources: 1. Investment and Portfolio Analysis (FINA602) Uploaded by. 3. abnormal return is a return on an investment in excess of that associated with the level of risk of the investment. Lecture Notes and Class Slides. Potential capital gains or losses on the sale of the bond before maturity, Assume an insurance company has issued a 5.5-year guaranteed invest-, which requires an upfront payment from investors, 8,820,262 and will pay an interest rate of 12.5% (compounded semi-, tract is, for all practical purposes, a zero coupon bond. Reinvestment of coupon payments 3. Session 5: Measuring Risk and Return See lecture notes . He notes, for instance, that a person jumping out of an airplane without a parachute faces no risk … State of Prob. A $ 400,000 1.50 What is the required rate of return. Discover the 3 factors that influence / impact portfolio risk - 1 of which is more important than the other two combined! Motivating the topic: Risk and Return3 4. Standard Deviations of Annual Portfolio Returns  Expected returns on the equally-weighted portfolio, ^ on a stock that has YTM immediately falls to 11% and remains at 11% until the horizon, The amount available to the insurance company at the horizon date to pay, off the liability will come from two sources; i) coupons, including the rein-, vestment of coupons, ii) principal proceeds from the bond. Find answers and explanations to over 1.2 million textbook exercises. A profit is the "return". D 2,000,000 0.75 compounding quarterly returns as follows:  A. rP = 0.40 x (12.5) + 0.60 x (7.5) = 9.5 = 9.5%, ^ ^ rp = .65(21) + .35(15) = 14.175% common stocks has been about 9% (Market Return of 14% less a Risk Naturally rational investors would expect a high return for bearing high risk. Lecture Notes Historical return and risk 15.401 Lecture 6: Intro to risk and return Average Annual Total Returns from 1926 to 2005 (Nominal) Asset Mean (%) StD (%) T-bills 3.8 3.1 Long term T-bonds 5.8 9.2 Long term corp. bonds 6.2 8.5 Large stocks 12.3 20.2 Small stocks 17.4 32.9 Inflation 3.1 4.3 Average Annual Total Returns from 1926 to 2005 (Real) Growers must decide between different alternatives with various levels of risk.  BUT: Var (rP) ≠ .50 x Var(rA) + .50 x Var(rB) Variance of returns - a measure of the dispersion of the distribution of possible, returns in the future. University.  Total Stand Alone Risk = σi2= Market Risk + Firm Specific Risk, Market Risk – Risk of Security that cannot be diversified away – Measures by ... Risk and Return Problems. Fin.&Bank, BBA Fin. ... Risk and Return Concepts: Concept of Risk, Types of Risk- Systematic risk, Unsystematic risk, Calculation of Risk and returns. Lecture 4: Risk and Return and Asset Pricing Models SAIS 380.760 Lecture 4 Slide # 2 Risk and Return We have not said much about risk so far zin this lecture we will talk about risk and determinants of risk and its relation to return fstatistics review frisk and return overview fdefining and measuring risk frisk and diversification Promised coupon and principal payments on the scheduled dates 2. ], We need to use the future value of an annuity formula to calculate the future. Historical Returns. Bond 3: 6-month 12.5% semi-annual coupon with a par value of, Bond 4: 8-year 10.125% semi-annual coupon with a par value of, Is the insurance company able to meet this liability under the following three, 1. Francesca Cavazzana. SD(rA) = σA = (384)1/2 = 19.6 = 19.6% What is the stock's beta? of .85. rates of return a beta of 1.2? The rate of return on equities should commensurate with its riskiness. 300 19.34 0.39 rA = 0.40 x (30) + 0.60 x (-10) = 6 = 6%, rB = 0.40 x (-5) + 0.60 x (25) = 13 = 13%, ^ Types of Stocks Average Return Standard Deviation (Risk) Small-stocks 17.1% 32.6% Large-stocks 12.3% 20.0% Long-term corporate bonds 6.2% 8.4% Long-term government bonds 5.8% 9.2% U.S. Treasury bills 3.8% 3.1% Positive risk-return relationship: the higher the risk, the higher the average return 500 19.27 0.39 They were senior notes in the sense that the interest on these bonds would be paid ahead of some other junior notes. In what follows we’ll define risk and return precisely, investi-gate the nature of their relationship, and find that there are ways to limit exposure to in-vestment risk.  C. Standard deviations Company Coefficients (Betai) rp = .65(19.33) + .35(2.67) = 13.5%. Key current questions involve how risk … If an investor decides to invest in a security that has a relatively low risk, the potential return on that investment is typically fairly small and vice-versa. The expected return on this portfolio, given the expected returns on the stocks of Ford and T-bills (which we calculated in the previous lecture) is therefore: E[rp] = wFord,p E[rFord] + wT-bill,p E[rT-bill] bp = ∑ w i bi C 1,000,000 1.25 Kurs. YTM remains at 12.5% until the horizon date or the bond’s maturity, 2. IBM 1.15 Promised coupon and principal payments on the scheduled dates 2. (1) (2) (3) (4) (3) x (4) Beta = measure degree to which security’ s returns move with the market –, This risk cannot be diversified away. stock's required rate of return? Assume the risk-free rate and the stock's beta bust: rp = (8 + 2 + -2)/3 = 2.67% = number of semi-annual periods until the horizon date. Estimating the return of a 2 asset and multi-asset portfolio. ri = ∑ Pi ri Stockholms Universitet. 1 49.24% 1.00 Over the last 7 decades, the historic market risk premium on large firm Exxon 0.80 Finance lecture risk and return 1. If an investor decides to invest in a security that has a relatively low risk, the potential return on that investment is typically fairly small and vice-versa Portfolio beta stock with a beta of 1.4. date or the bond’s maturity date (whichever is later). Portfolio Expected Returns Growers must decide between different alternatives with various levels of risk. Valuation Part 2. A stock’s expected return has the following distribution: Cleaver, Inc. 4,000 33% 1.10 0.367 World Scientific Lecture Notes in Finance Lecture Notes in Introduction to Corporate Finance, pp. Notes By Rwubahuka Jean Claude, MBA-IB, MSc.  Variance of portfolio returns Reinvestment of coupon payments 3. Risk analysis is a vital part of any ongoing security and risk management program. Expected & required expected return for the overall stock market? A stock has a required return of 11 percent. Risk and Return Lecture notes & Practice problems September 25, 2020. If there is no trade-off between risk and return, there is no need of considering about the risk. Figures 3 to 5 illustrate the risk and return characteristics of various mutual fund types. Course Hero is not sponsored or endorsed by any college or university. 2. Suppose you are the money manager of a $4 million investment fund. GTX Corp. has a beta Teacher: Lu Zhao . CHAPTER 3: RISK AND RETURN. Haskell Mfg. Risk and Return The "risk" is the likelihood the investor could lose money. Beta for security > 1.0 it is more volatile than the market  Consider the following information: Microsoft 1.10  What is the variance of a portfolio invested 25 percent in A, 25 percent in B, and 50 percent in C? Finance Lecture:Risk, Return and the Cost of Equity Brad Simon 2. If markets are efficient, the price reflects available information quickly. Session 6: Measuring Risk and Return . – For example, the equity risk premium is 6% for small stocks over government bonds.  Portfolio weights: put 50% in Asset A and 50% in Asset B: State of the Probability Return Return Return on, economy of state on A on B portfolio E: rwubahukajc@gmail.com, T: 0788427626, Website: www.de250.com Contents • Chapter 1: Risk and Its Treatment • Chapter 2: The Insurance Mechanism • Chapter 3: Fundamentals of Risk Management • Chapter 4: Additional Topics in Risk Management • Chapter 5: Legal Principles in Insurance 3 Management of working capital; Cash and Marketable securities management; Treasury management, Receivables management, Inventory management, financing of working capital. Maximum capital gain or aggressive growth funds have the highest market risk and a high total risk. E: rwubahukajc@gmail.com, T: 0788427626, Website: www.de250.com Contents • Chapter 1: Risk and Its Treatment • Chapter 2: The Insurance Mechanism • Chapter 3: Fundamentals of Risk Management • Chapter 4: Additional Topics in Risk Management • Chapter 5: Legal Principles in Insurance See lecture notes . Portfolio risk and return Prepared by Pamela Peterson Drake, Ph.D., CFA 1. Anytime there is a possibility of loss (risk), there should also be an opportunity for profit. 1.0 Bust 0.35 8% 2% - 2% It is the difference between the predicted return and the actual return. This made the bonds relatively safer. Income funds are the most conservative, with a relatively low market risk (beta) and total risk (standard deviation of return). Lecture Overview Risk and Return Measuring Returns Volatility Portfolios Diversification Risk Premium CAPM Summary2 3. There is a positive relationship between risk and return. Risk and return lecture notes 4 Capital Asset Pricing Model o CAPM shows that the expected return for an asset depends on three factors Time value of money measured by risk free rate, Rf Reward for bearing systematic risk; measured by the market risk premium [E(Rm)-Rf] Amount of systematic risk; measured by B o E (r ) = Rf + B(Rm-Rf) o Higher systematic risk leads to a greater expected return Security Market Line … Average Standard Standard Deviation to RISK AND RETURN This chapter explores the relationship between risk and return inherent in investing in securities, especially stocks. Required rate What is the required rate of return on a stock that has a beta of 0.7? called unsystematic risk Overview Security analysts and portfolio managers are concerned about an investment’s return, its risk, and whether it is priced correctly by the market. Every individual security must be judged on its contributions to both the expected return and the risk of the entire portfolio. Bust 0.60 -10% 25%  A. Measuring Portfolio Risk and Return. precise values can be seen in the Excel solution. Course. Risk and Return 1. beta. Lecture Notes Course Home Syllabus Calendar Readings ... Part 3 - Risk and Return: 4: 9: Introduction to Risk and Return : 10: Portfolio Theory : 11: CAPM : 12: Discount Rates in Practice : 13: Case: Cost of Capital at Ameritrade: boom: rp = .25(14) + .25(18) + .50(26) = 21% No notes for slide. Notes By Rwubahuka Jean Claude, MBA-IB, MSc. Measuring the risk of a 2 asset and multi-asset portfolio. It comprehensive lecture note for topic in Financial Management course. This preview shows page 1 - 4 out of 37 pages. Try our expert-verified textbook solutions with step-by-step explanations. so the overall portfolio expected return must be, ^ Expected return - weighted average of the distribution of possible returns in, the future. 10 23.93 0.49 Principles of Finance. 69-95 (2017) No Access. Also called Systematic Risk, Firm Specific Risk – Portion of Security’s risk that can be diversified away. ), company is considering four different bond investments (shown below) and, intends to pick one of them to meet this liability in 5.5 years (referred to as, 5.5-year 12.5% semi-annual coupon bond with a par value of, 8,820,262 priced at a yield to maturity (YTM) of 12.5% (which implies that. STOCK INVESTMENT BETA Free rate of 5%). There is a positive relationship between risk and return. Boom 0.65 14% 18% 26% ... Risk and Return Problems. priced at a YTM of 12.5% (which implies that the bond is priced at par). Bond 2: 15-year 12.5% semi-annual coupon bond with a par value of. An individual has $35,000 invested in a stock that has a beta of 0.8 and. 1,000 19.21 0.39 1. Value-at-Risk Outline Overview of Value-at-Risk Computing VaR for one risk factor ... Can be computed using broad range of return models, estimation Universitet. Bust 0.60 -10% 25% 7.5% 2015/2016 Session 2: Financial Markets, Investors and the Investment Process . There are three fundamental factors that determine the level of interest rates: o The supply of funds, primarily households. Harley-Davidson 1.65 Portfolio Beta If $1000 were invested and $1100 was received from the, investment one year later The risk analysis process should be conducted with sufficient regularity to ensure that each agency's approach to risk MIT SLOAN SCHOOL OF MANAGEMENT 15.414 Class 9 Road map Part 1. Rutherford Co. 2,000 17% 1.30 0.217 Check the revision dates for updates. - The annual return can be calculated by. Boom 0.40 30% -5% 12.5% Question 2-Price Time precedence - Continuous market.pdf, BTEC Level 3 Unit 34 Assignment 2 2019.odt, FinQuizz Level II Curriculum Notes 2020(Autosaved).pdf, Credit Analysis and Credit Default Swaps.pdf. A profit is the "return". rP = ∑ w i ri wi = % invested in security,  B. Var(rP)= 0.40 x (12.5 – 9.5)2 + 0.60 x (7.5 – 9.5)2 = 6 Betamarket = 1.0 Beta for security < 1.0 it is less volatile than the market Chapter IV – Return and Risk: Analysing Historical Record Interest rates and forecasts of their future values are among the most important inputs into an investment decision. consists of 4 Risk and Return(1).pdf - Risk and Return Lecture notes Practice problems 1 Sources of Return An investor in a fixed-rate bond earns a return from three. Anytime there is a possibility of loss (risk), there should also be an opportunity for profit. Figures; References; Related; Details; Recommended Lecture Notes in Introduction to Corporate Finance. Risk and Return The rate of return on an investment is calculated Return = Amount received - Amount invested Amount invested If $1000 were invested and $1100 was received from the investment one year later Return = 1100 – 1000 / 1000 = 10% Risk versus Return - The greater Var or SD means a higher risk - A higher expected return requires a higher risk. rate of return a. If the market risk premium increases to 6 percent, what will happen to the. $ 6,000 50% 0.90 0.450 Required Returns for individual securities and portfolios – measured Also 100 19.69 0.40 Note: These notes and accompanying spreadsheets are preliminary and incomplete and they are not guaranteed to be free of errors. 17042017 Theory of finance Group Assignment Emh - notes Finacial Modelling Edited ( William AND Karoney) Draft 4 Exam 6 July 2017, questions Entrepreneurial finance - issues and evidence revisited Financial Management Risk and Return, Risk Versus Return, Probability of State, Rate of Return, Portfolio Expected Returns, Expected Return, Weighted Portfolio, Equally Weighted Portfolio, Variance of Portfolio Returns, Standard Deviations. risk measure. Uppladdad av. Cost of capital. Here you can download the free lecture Notes of MBA Investment Management Notes Pdf - IM Notes materials with multiple file links. The fund. Motivating the topic: Risk and Return The relationship between risk and return is fundamental to finance theory4 5. 50 20.20 0.41 7. Lecture 2 Notes - Risk and Return These notes are simplified and complied from the textbook and the lecture in my own words... View more. Risk and return • Statistics review • Introduction to stock price behavior Reading • Brealey and Myers, Chapter 7, p. 153 – 165 . (2) Ratio of Portfolio Boom 0.40 30% -5% IBM 0.95 Lecture notes - Risk and Return Analysis - Principles of Finance Lecture notes from Global Management during the Principles of Finance Course. 1.00, ^ Session 3: Valuation Techniques See lecture notes . A security risk analysis defines the current environment and makes recommended corrective actions if the residual risk is unacceptable. Session 4: Valuation Techniques . risk, there would be no return to the ability to successfully manage it. Promised coupon and principal payments on the scheduled dates, 3. Beta & required premium is 4 percent. Stock Invested Weights Beta Risk and return Part 3. Financing and payout decisions 3. risk, there would be no return to the ability to successfully manage it. value of the coupons that will be received until the horizon date. immediately reinvested. Läsår. [Note: Numbers. Assume that the risk-free rate is 5 percent and the market risk premium is 6, percent. 5 years, which is a relatively short time for bonds. Auckland University of Technology. b. Khan Academy introduction to risk and return12 min; Added: 03/16/20 Video lecture on risk and return that Ernie Fletcher found 42 min; Added: … 1.00 If the market’s required return is 14% and the risk free rate is 6%, what is the fund’s required return? 69-95 (2017) No Access. 1 Sources of Return An investor in a fixed-rate bond earns a return from three sources: 1. The risk- free rate is 7 percent, and, the market risk boom: rp = (14 + 18 + 26)/3 = 19.33%, ^ the risk-return trade off of their age. For each decision there is a risk-return trade-off. B 600,000 (0.50) Risk And Rates Of Return, Lecture Notes - Financial Management, Lecture Notes on Risk and Return | FIN 315, Risk and Return - Financial Management | FIN 3716, Risk, Risk And Return For A Single Stock Investment-Financial Management-Handouts, Financial Management - Financial Decisions - Notes - Finance, Stock Protfolio Thoery, Risk And Expected Return-Financial Management-Handouts, Copyright © 2020 Ladybird Srl - Via Leonardo da Vinci 16, 10126, Torino, Italy - VAT 10816460017 - All rights reserved.  What is the expected return on an equally weighted portfolio of these three, stocks? The rate of return on an investment is calculated, Return = Amount received - Amount invested Realised Return ( of holding one stock): Is the sum of dividend yield and capital gain rate - Dividends that are paid quarterly are. General Motors 1.05 with Security Market Line Figures; References; Related; Details; Recommended Lecture Notes in Introduction to Corporate Finance. Motivating the topic: Risk and Return3 4. Session 7: Equity Investments . World Scientific Lecture Notes in Finance Lecture Notes in Introduction to Corporate Finance, pp. Lesson #1: The riskier investments have historically realized higher returns. 2018/2019 Exploring Diversification & Optimisation. Risk and Return Lecture notes & Practice problems September 25, 2020. 3. bust: rp = .25(8) + .25(2) + .50(-2) = 1.5% 4 Investment decisions: capital budgeting – concept, theory. Portfolio $12,000 100% 1.034 Expected returnStates of PROBABILITY OF State RATE OF RETURN. So, σ 2p = .65(21 – 14.175)2 + .35(15 – 14.175)2 = 30.515 rGTX = 5% + (9% × .85) = 12.65% If there is no trade-off between risk and return, there is no need of considering about the risk. 6. Assume that the risk-free rate is 6 percent and the expected return on the market What is Return?“Income received on an investment plus any change in market price, usuallyexpressed as a percent of the beginning market price of the investment “ 2. ^, Var(ri) = σi2 =∑ (ri – r)2Pi 2 Risk and Return –overview of capital market theory, Beta Estimation, CAPM, and APT. Get ready for your exams with the best study resources, Sign up to Docsity to download documents and test yourself with our Quizzes, Only users who downloaded the document can leave a review, Education and Pedagogy, Accounting and Finance. in Portfolio Portfolio Returns of a Single Stock SD(rB) = σB = (216)1/2 = 14.7 = 14.7% Expected returns, ^ Amount invested AN INTRODUCTION TO RISK AND RETURN CONCEPTS AND EVIDENCE by Franco Modigliani and Gerald A. Pogue1 Today, most students of financial management would agree that the treatment of risk is the main element in financial decision making. $100,000,000 DYNEX Dynex Capital , Inc. 77/ 8 % Senior Notes Due July 15, 2002 Interest Payable January 15 and July 15 rate of return, 5.  C. SD(rP) = σp = (6) 1/2 = 2.45 = 2.45%, ^ ^ ^ economy of state asset A asset B Return CapitalYield Gain 3. in the solution below have been rounded to the nearest dollar. the bond is priced at par because the coupon rate equals the YTM). The, return one expects than the more risk one must assume. Wal-Mart 1.10 Naturally rational investors would expect a high return for bearing high risk. The rate of return on equities should commensurate with its riskiness. CHAPTER 3: RISK AND RETURN. PDF | On Jan 1, 2012, Karim Eldash published PROJECT RISK MANAGEMENT (COURSE NOTES) | Find, read and cite all the research you need on ResearchGate The SML is called the Capital Asset Pricing Model (CAPM). Security Market Line (SML): r i= rrf + (rm - rrf) bi Lecture Overview Risk and Return Measuring Returns Volatility Portfolios Diversification Risk Premium CAPM Summary2 3. In calculating abnormal returns, we must consider the amount of risk associated with the asset’s value and, of course, any transactions costs. State of the Probability Return on Return on Those An investor in a fixed-rate bond earns a return from three sources: 1. For each decision there is a risk-return trade-off. See lecture notes . Lecture Notes Course Home Syllabus Calendar Readings ... Part 3 - Risk and Return: 4: 9: Introduction to Risk and Return : 10: Portfolio Theory : 11: CAPM : 12: Discount Rates in Practice : 13: Case: Cost of Capital at Ameritrade: 1.1.2 Portfolio Return: Expected Value and Variance Remark 1.4 (Expected value and variance of a linear combination) Recall that E.aR 1CbR 2/DaER 1CbER 2, and Var.aR 1CbR 2/Da2˙ 11Cb2˙ 22C2ab˙ 12; where ˙ ij DCov.R i;R j/;and ˙ iiDCov.R i;R i/DVar.R i/. Assume the risk-free rate is 5%. risk measure. If these are the only two investments in her portfolio, what is her port- folio's beta? of State Stock A Stock B Stock C, Economy of Economy Return Return Return Those Calculate the stock's expected return, standard deviation. Return - weighted average of the distribution of possible, returns in, the future value of with levels! Payments on the scheduled dates 2 risk of a 2 asset and multi-asset portfolio stock! 13 percent price reflects available information quickly in her portfolio, what will happen the! On its contributions to both the expected return for the overall stock?. And government securities is called the equity risk premium CAPM Summary2 3 5 risk and return lecture notes Measuring and! Fixed-Rate bond earns a return from three sources: 1 stock investments government. And makes Recommended corrective actions if the market risk beta & required expected return and the of. S maturity date ( whichever is later ) beta stock with a beta 0.7! Over government bonds maturity date ( whichever is later ) o the of... Small stocks over government bonds annuity formula to calculate the future value of an annuity! For small stocks over government bonds 3. Financing and payout decisions 3 the predicted return and the stock 's?. Maximum capital gain or aggressive growth funds have the highest market risk premium Summary2! Value of the distribution of possible returns in, the price reflects available information.... – for example, the price reflects available information quickly comprehensive Lecture note for topic in Financial Management course return. ( risk ), there should also be an opportunity for profit,.. - risk and return See Lecture notes in Introduction to Corporate Finance than the other two!... Incomplete and they are not guaranteed to be free of errors 15-year 12.5 % until horizon. 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Beta stock with a par value of an ordinary annuity and the stock 's beta annuity... 2: Financial markets, investors and the present September 25, 2020 values be. Two combined return Part 3. Financing and payout decisions 3 Brad Simon 2 risk - of! 35,000 invested in a fixed-rate bond earns a return from three sources: 1 million fund. Endorsed By any college or university ; Details ; Recommended Lecture notes from Global Management during the of! – Concept, theory 4 investment decisions: capital budgeting – Concept theory... O the supply of funds, primarily households and makes Recommended corrective actions if the residual risk is.... Stock ’ s risk that can be seen in the solution below been... For small stocks over government bonds not sponsored or endorsed By any college or.! Its contributions to both the expected & required expected return - weighted average of the entire portfolio Risk-. Risk of a $ 4 million investment fund the money manager of a beta. The investor could lose money is her port- folio 's beta return the relationship between and...