a. Discuss the various theories of valuation and their relevance in security pricing. 10 marks b. The Capital Asset Pricing Model (C.APM) was introduced by Treynor(1961), Sharpe (1964) and Lintner (1965). On what assumptions was this model based? 5 marks c. Discuss the various stages involved in the investment process and their usefulness. 5 marks QUESTION TWO (10 MARKS) a. Why is it necessary to manage investment portfolio and what are the processes involved? 4 marks b. At present suppose the risk free rate is 10\% and the expected return on the market portfolio is 15%. The expected returns for four stocks are listed below together with their expected betas. \begin{tabular}{|l|l|l|} \hline Stock & Expected return & Expected Beta \\ \hline Lentrice Motors & 17.5% & 1.3 \\ \hline SimeonTextiles & 14.5% & 0.8 \\ \hline Emmah Systems & 15.5% & 1.1 \\ \hline \end{tabular}