1. The following information is relevant for answering the questions that follow:

Risk-free rate of return = 8%

Expected return of the market portfolio = 12%

a. Find out the required rate of return of the common shares of Beximco Pharmaceutical Limited (BPL) if the beta of the share is 1.3.

b. If the average yearly return of BPL stock over the last 10 years is found to be 15% and this can be taken as the predicted return of the company, would you buy this share? Justify you answer.

c. Given the risk-free rate of return and expected return of the market portfolio mentioned above, calculate the beta of a stock if its required rate of return is 18%.

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