QUESTION 3

Year	Stock A	Stock B
2016	-0.03840	-0.06928
2017	0.15318	0.20556
2018	-0.09802	0.07194
2019	0.06748	0.33994
2020	0.39036	0.43839
2021	0.01963	-0.02673

1. Calculate beta and required rate of returns of the respective portfolio by using Capital Asset Pricing Model (CAPM). Assume that a beta of 1.45 and 0.76 for Stock A and Stock B respectively. A return on a market portfolio (Rm) of 9 percent and a risk-free rate (Rf) of 2 percent. (Calculations must be done manually. Show all workings:

Portfolio:	P1	P2	P3	P4	P5	P6	P7	P8	P9	P10	P11
Stock A	100%	90%	80%	70%	60%	50%	40%	30%	20%	10%	0%
Stock B	0%	10%	20%	30%	40%	50%	60%	70%	80%	90%	100%
Beta	BP1	BP2	BP3	BP4	BP5	BP6	BP7	BP8	BP9	BP10	BP11
Required Return	RP1	RP2	RP3	RP4	RP5	RP6	RP7	RDP8	RP9	RP10	RP11

(22 marks)

Beta portfolio = summation of weightage x beta