Question 04 i. Differentiate the Capital Market Line (CML) and Security Market Line (SML) of the Capital Asset Pricing Model (CAPM). Briefly explain emphasizing on the use of these two lines for investors. (05 Marks) Security market efficiency is very important to have a healthy financial system. Do you agree? Briefly explain. (05 Marks) ii. iii. You plan to make an investment in a portfolio consists of the securities given in the table below. Security Treasury bills Market A B Expected Return 10 15 14 5 Standard Beta Deviation Value 0 0.00 17 1.00 25 0.90 20 -0.90 a. Do you include treasury bills in your portfolio? Explain. b. Do you include Stock B in your portfolio? Explain. c. According to the CAPM, is this market at the equilibrium? d. If not, what would be the reaction of investors to make the equilibrium in the market? (10 Marks) (Total 20 Marks)