QUESTION 2

An analysts expected return on two shares for particular market returns have been given as follow:

Market Return	Aggressive share	Defensive share
6%	2%	8%
20	30	16

1. What are the beta of the two shares?
2. What is the expected return on each share if the market return is equally likely to be 6% or 20 %?
3. If the risk-free rate is 7% and the market return is equally likely to be 6% or 20% what is the security market line?
4. Using the results obtained in part c, use CAPM to find out the beta for the portfolio