(a) Briefly explain three practical uses of the capital asset pricing model. ( 6 marks)

(b) Mr. Mlachake is currently holding a portfolio consisting of shares of four companies quoted on the Bahati Stock Exchange as follows:

Company	Number of shares held	Beta equity co-efficient	Market price per share	Expected return on equity in the next year %
A B C D	20,000 30,000 30,000 20,000	1.12 0.89 0.70 1.60	65 50 45 80	18 23 11 17

The current market return is 14% per annum and the treasury bills yield is 9% per annum.

Required:

(i) Calculate the risk of Mlachakes portfolio relative to that of the market. ( 5 marks)

(ii) Explain whether or not Mlachake should change the composition of his portfolio