Question 4: (1) A portfolio is constructed from three shares as follows: Share X Y Z No. of shares 15,000 25,000 10,000 Share price Share beta (B) 400p 1.25 100p 1.10 0.95 Specific risk (%) 30 25 35 150p The risk-free rate is 3% per annum, the equity risk premium is 5% per annum, and the standard deviation of the market return is 25%. Using the CAPM, calculate: a) b) the expected return on the portfolio. (20 Marks) the total risk of the portfolio. (25 Marks) two measures of the efficiency of diversification of the portfolio. (25 Marks) c) (ii) Outline in detail the differences and similarities between the Capital Asset Pricing Model and Arbitrage Pricing Theory. (30 Marks)