Consider a portfolio with the following equity positions:

Asset Investment Beta

Liquefied Natural Gas Limited (LNG) $26,000 1.7

Greencross Limited (GXL) $28,000 & beta 1.3

Brambles Limited (BXB) $34,000 & beta 0.8

Macquarie Group Limited (MQG) $40,000 & beta 1.2

Telstra Corporation Limited (TLS) $32,000 & beta 0.9

The portfolio also has $40,000 invested in 10-year Australian government bonds with a

yield-to-maturity of 2.75% p.a. The current market risk premium is 7% p.a.

(a) What is the expected return on the market portfolio?