Mr Manik a portfolio consultant advised one of his clients Manish to invest in a company's stock at price of Rs. 1500 per share. The stock has been much more volatile than the market in last few years, with bela of 20 The risk-free rate is 6% pa, and the market is expected to give him return of 15% p.a. in coming period a Calculate the expected Retums if Manik uses the Capital Asset Pricing Model (6 marks) b. What will be Expected return if the risk factor that is beta is reduced to 1 257 (6 marks) c In your opinion is the CAPM reliable for forecasting returns? Give reasons with your Justifications of CAPM (3 marks) Maximum file size 20MB, maximum number of files 1 A portfolio has been constructed by combining 2 assets in equal proportions. The Expected Returns in different economic scenarios are given in the table below Probability 0 20 Economic Scenario Boom Normal Recession Asset A return 22% 14% 7% Asset B retum 6% 10% 12% 0.55 0.25 Calculate 1) Expected Rate of Return and Variance of returns for Asset A (4 marks) ) Expected Rate of Return and Variance of returns for Asset B (4 marks) m) Coefficient of Correlation between Asset A and B (4 marks) IV) Portfolio Return and Portfolio Risk (8 marks) Maximum file size 20MIR