In Exercise 17.1 we saw that the required rate of return on Wyndham Wines plc’s shares was 20 per cent p.a.

1 Using the information given in Exercise 17.1, identify separately the dividend yield component and the capital gain component.

2 Suppose that there is a reduction in the market price of risk so that the market risk premium falls to 9 per cent, risk-free rates remaining at 6 per cent and the -coefficient remaining at 1.4. What happens to

(a) the total return on Wyndham Wines’ shares and

(b) the dividend yield?