QUESTION $2$

$($a$)$ Using the Capital Asset Pricing Model $($CAPM$),$ calculate the expected return on Saveur Plus Limited, if the return on T$-$Bills is $3\%,$ while the expected return on the market is $7\%.$ It has also been noted that beta is quite reactive at $1.$ Interpret your result.

$(5$ marks$)$

$($b$)$ Calculate the new expected return if beta was $0\mathrm{.}8$ and comment on the result obtained, with respect to beta changes, compare to part $($a$)$ above.

$(5$ marks$)$

$($c$)$ Discuss to which extent does the values of beta are important to the investment strategies of an investor. $(10$ marks$)$