a. Estimate beta for each of the following securities assuming that the standard deviation of returns for the market portfolio (m) is 8.0 percent.

b. Based on the Capital Asset Pricing Model, with a risk-free rate (rf ) of 7 percent and a market risk premium (rm - rf) of 8.8 percent, which of the securities, P, Q, R (if any) appear to be attractive investments?

Security Expected Return

P 12% Q 18% R 15%

Standard Deviation

P 10% Q20% R15%

Correlation Coefficient Between Returns for the Security and Market Portfolio

P 0.80 Q 0.60 R 0.40