a. using the expectation model of capital asset pricing model, describe and justify what the value of beta of an Australian government bond should be. b. Eastern Solar is considering a new investment in Brazil. Initial estimates of the investment returns have revealed the following:

Probaility 10% 40% 30% 20%

Return -12% 20% 35% 37%

The company's board of directors has determined that the project requires a risk premium of 18% per annum. The risk-free rate is 5.5% per annum and the company has a beta coefficient of 1.0. Using the information provided, calculate the expected return of the new project and conclude if the project should or should not be undertaken.