b) Consider two assets: The market portfolio (M) and Stock A. The expected rate of return and standard deviation of the market portfolio is 8% and 15%, respectively. - The risk-free rate is 2%. - The standard deviation of the market portfolio's return is 15%. - Stock A has a beta of 1 and a standard deviation of 30%. Currently all your client's funds are invested in stock A. Assume that the CAPM holds (=> expected return = required return). The following questions are independent of each other. (a) Draw the capital market line and show the position of stock A. (5 marks) (b) Draw the security market line and show the position of stock A. (5 marks) [Hints for (a) and (b): Full mark would only be given to completely and correctly labelled diagram. b) Consider two assets: The market portfolio (M) and Stock A. The expected rate of return and standard deviation of the market portfolio is 8% and 15%, respectively. - The risk-free rate is 2%. - The standard deviation of the market portfolio's return is 15%. - Stock A has a beta of 1 and a standard deviation of 30%. Currently all your client's funds are invested in stock A. Assume that the CAPM holds (=> expected return = required return). The following questions are independent of each other. (a) Draw the capital market line and show the position of stock A. (5 marks) (b) Draw the security market line and show the position of stock A. (5 marks) [Hints for (a) and (b): Full mark would only be given to completely and correctly labelled diagram