Question 3 (7 marks) Peter is a financial investor who actively buys and sells in the securities market. Peter has a portfolio which provided the returns of 13.7 %, 10.5 %, 11.7 %, 25.5% and 19.2% over the past five years, respectively. Required: a) Calculate the arithmetic and geometric average returns of Peter's portfolio for this five-year period. (2 marks) ANSWER a): b) Assume that the expected return of the share A in Peter's portfolio is 15.4%. The market risk premium is 6.8%, Government Bond rate of return is 7.2%. Calculate the beta co-efficient of this share using the Capital Asset Pricing Model (CAPM). (1 mark) ANSWER b): c) Peter has just set up another portfolio that comprises of two shares only: $3,500 Blue shares and $4,700 Red shares. Below is the data of this portfolio: Expected return Standard Deviation of return Blue Red 17% 23% 22% 39% 0.45 Correlation of coefficient (p) Compute the expected return and measure the risk of Peter's portfolio by calculating the portfolio standard deviation. (4 marks) ANSWER C):