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Answers gor question 2 and 3. kindly show all working. Consider the following information about the various states of economy and the returns of various
Answers gor question 2 and 3. kindly show all working.
Consider the following information about the various states of economy and the returns of various investment alternatives for each scenario. Answer the questions that follow. Question 1 (18 marks) Fill the parts in the above table that are shaded in yellow. You will notice that there are nine line items. Each line item is worth 2 marks Question 2 (8 marks) Using the data generated in the previous question (Question 1); RELEASED BY THE CC, MGMT2023, SEMESTER 1, 2022 a) Plot the Security Market Line (SML) (2 marks) b) Superimpose the CAPM's required return on the SML (2 marks) c) Indicate which investments will plot on, above and below the SML? (2 marks) d) If an investment's expected return (mean return) does not plot on the SML, what does it show? Identify undervalued/overvalued investments from the graph (2 marks) Question 3 (4 marks) From the information generated in the previous two questions; a) Identify two investment alternatives that can be combined in a portfolio. Assume a 5050 investment allocation in each investment alternative (1 mark) b) Compute the expected return of the portfolio thus formed (1 mark) c) Compute the portfolio's beta. Is the portfolio aggressive or defensive? (2 marks)
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