Alfa Ltd currently under consideration is an investment with a beta, b, of 1.5. Currently, the risk-free rate of return RF, is 3%, and the return on the market portfolio of assets rm is 10%. You believe this investment will earn an annual rate of return of 11%.

1. If the return on the market portfolio were to increase by 10%, what would you expect to happen to the investment's return? What if the market return were to decline by 10%.
2. Use the capital asset pricing model (CAPM) to find the required return on this investment.
3. Based on your calculation in part b, would you recommend this investment? Why or why not?