IMPORTANT PLEASE .................

Q2. (a) Distinguish the THREE (3) levels of informational efficiency as defined in the efficient market hypothesis (EMH). Appraise the general implication that the EMH is trying to deliver to investors. (10 marks) (b) Refer to a portfolio that consists of the following stocks: Beta 0.60 Stock X Y Z Mean Return 7% 10% 18% Capital Invested RM300,000 RM500,000 RM200,000 1.20 1.80 The market rate of return is 11% and the risk-free rate of return is 3.5%. (i) Determine the expected return of the portfolio. (3 marks) (ii) Using the Capital Asset Pricing Model (CAPM), determine the beta and the required return for the portfolio. Explain whether you would invest in the portfolio. (7 marks)