2. Assume the following data: The market risk premium is 7% p.a. The variance of the return on the market is 0.14, and The risk-free rate is 6% p.a. Your task is to determine a discount rate appropriate for a single company, BHP. If the variance of BHP's return is 0.30 and its beta is 1.20, what is the expected return of BHP? 3. In a small economy, the market portfolio comprises shares in only three companies: D, E and F. Details are set out in the table below. Company name Shares issued Price per share D E F 1,000,000 500,000 1,600,000 $2.00 $8.00 $2.50 Expected Return 8% 10% 21% There is also a risk-free asset that offers a return of 4%. a. Calculate the expected return on the market portfolio. b. Assume that the capital asset pricing model (CAPM) applies in this market; calculate the beta of company E