A portfolio of shares in Australian growth companies has a return of 10%, beta of 1.3 and standard deviation of 7%. The interest rate on Treasury bonds is 3.5% and the return on the ASX200 is 8% with a standard deviation of 5%.

1. Explain, whether this information indicates that the ASX is an efficient market according to the capital asset pricing model (CAPM). (Worth 2 marks)
2. Use the capital allocation line (CAL) of the portfolio and capital market line to test whether the CAPM is valid. Explain, why you came to this conclusion. (Worth 1 mark)
3. Describe, how you could use the arbitrage pricing theory (APT) to estimate the expected return on this portfolio of shares. (Worth 2 marks)