Question $2$

Aiman's portfolio is currently valued at RM$500,000.$ His portfolio comprises the following shares:

$\backslash$table$[[$Shares$,$Beta factor,Value $($RM$)],[$Red Berhad,$0\mathrm{.}5,250,000],[$Orange Berhad,$1\mathrm{.}1,150,000],[$Yellow Berhad,$1\mathrm{.}8,100,000]]$

From the above information, you are required to answer the following questions.

a$.$ Compute the portfolio's beta factor. Clearly state the formula and show your workings. $(4$ Marks$)$

b$.$ Based on your computation in part $($a$),$ given that the market risk$-$free rate is $2\%$ and market risk premium is $8\%,$ calculate the required rate of return of Aiman's portfolio. Clearly state the formula and show your workings.

$(2$ Marks$)$

c$.$ Based on your computation in part $($a$),$ given that the market risk$-$free rate is $2\%$ and market risk premium is $10\%,$ calculate the required rate of return of Aiman's portfolio. Clearly state the formula and show your workings.

$(2$ Marks$)$

d$.$ Based on your calculation in part $($b$)$ and $($c$),$ interpret your findings.

$(2$ Marks$)$

$($Total: $10$ Marks$)$

Formula

Expected Return

$K=P_1{K}_1+P_2{K}_2$

$q,P_n{k}_n$

Standard Deviation:

The Coefficient of Variation $($CV$)$: $,CV=\frac{}{K^{-}}$

The Expected Retum on a Portfolio:

$k^{-}p=w_1{k}_1^{-}+w_2{k}_2^{-}+$dotsdotsdots.$+w_n{k}_n^{-}$

Portfolio Beta:

${}_p=w_1{}_1+w_2{}_2$dots

$k=k_r+(k_m-k_r)$

$k=k_r+(R{P}_m)$

$+w_n{}_n$

CAPM:

$k=k_r+(k_m-k_r)$

$k=k_r+(R{P}_m)$