a) Critically explain the assumptions of the Capital Asset Pricing Model. (30 Marks) b) Suppose that the risk premium on the market portfolio is estimated at 8% with a standard deviation of 22%. What is the risk premium on a portfolio invested 40% in Nissan and 60% in Rolls Royce, if they have betas of 1.10 and 1.25 respectively? (20 Marks) c) Consider the following table, which gives a security analyst's expected return on two stocks for two market regimes: (i) What are the betas of the two stocks? (10 Marks) (ii) What is the expected rate of return on each stock if the market return is equally likely to be 5% or 25% ? (10 Marks) d) Critically explain the Fama-French (FF) three factor model. Discuss how this model might be helpful to active investors in selecting stocks for investment. (30 Marks)