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Part B The able below gives information on the amount invested and beta coefficients for three stocks: Stock HRM BHP IBG Amount Invested RM 10,000
Part B The able below gives information on the amount invested and beta coefficients for three stocks: Stock HRM BHP IBG Amount Invested RM 10,000 RM 10,000 RM 20,000 Beta 1.0 1.2 0.7 Required: a) Based on the given information, using the capital asset pricing model (CAPM), calculate the required rate of return of the portfolio, if the expected return for the market is 9% and the risk-free rate is 3%. (4 marks) b) Explain TWO limitations of CAPM. (4 marks) "Do not put all your eggs in the same basket" c) Discuss the wisdom of this maxim as stated above in relation to the concept of diversification
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