1. According to au.finance.yahoo.com, APT has a beta of 1.88.What does this mean?[2.5 marks]
2. In terms of riskiness how would you compare APT's beta to the market?[2.5 marks]
3. Calculate the expected returns for APT using the Capital Asset Pricing Model (CAPM) and the following yields.[5 marks]

• The risk free rate (Rf) as measured by the yield on Australian 10 year treasury bonds is 1.5% p.a.
• The average return on the market for the past 10 years has been 10.5% p.a.
• Use the APT beta () of 1.88.

1. i. Using the CAPM data from (d), create a Excel scatter plot graph to plot the Security Market Line (SML)using the Rf, return on the market and APT.[5 marks]

ii. Based on your CAPM findings, construct a portfolio made up of 40% market and 60% APT. Calculate the estimated return and beta for this portfolio.