a. A company is considering a new venture. The initial investment is expected to be $628 million. It is expected to be worth $964 million in two years time. Due to its high-risk nature, the standard deviation of the return is estimated to be 36%. If the return on government securities is 9.2%, determine whether this is a good venture and whether it represents an efficient portfolio if the expected rate of return and standard deviation of return on the stock market index is 15.12% and 10.56% respectively. Justify your answer.

b. With reference to (a),

i. Discuss the payoff of this investment is certain or random; and

ii. If beta of the asset is 1.28, determine the value of the share of the oil venture based on CAPM, and discuss about the effect of standard deviation on this share value.