Consider the following two risky asset worlds:

	Security S	Security B
Expected return	0.16	0.10
Variance	0.0735	0.0563
Beta ()	1.2	0.9
Treasury bond rate	4%
Market return Rm	9%
coefficient of Correlation: (A,B)	-0.005

Answer the following questions:

5. Use the CAPM to evaluate the expected return of the two security (S) (1 Mark)

6. Explain why the expected return calculated in question 5 equals to the market return if beta equals 1 (1 Mark)