1.As an analyst you have gathered the following information: marks 20

Security

Expected Standard Deviation

Beta

Security 1

25%

1.50

Security 2

15%

1.40

Security 3

20%

1.60

(i)If the expected market risk premium is 6% and the risk-free rate is 3%, what will be the required rate of return on each of the above securities, and which of the security has the highest required return?

(ii)With respect to the capital asset pricing model, if expected return for Security 2 is equal to 11.4% and the risk-free rate is 3%, what is will be the expected return for the market.

(i)With respect to the capital asset pricing model, if the expected market risk premium is 6% which of the above securities provide the highest expected return?

(ii)With respect to the capital asset pricing model, a decline in the expected market return will have the greatest impact on the expected return of which of the above securities?