Question 4 (7 marks) Daniel's investment portfolio performance over the last 5 years is as follows. + Year Rate of return 1 15% 2 17% 3 -14% st 18% 5 16% Required: a. Calculate the arithmetic average return and the geometric average return of this portfolio (2 marks) b. Based on the forecasted information for the next year in the table, calculate the expected return of the portfolio, identify the portfolio risk by computing the variance and the standard deviation (4 marks) State of economy Probability of the economic state Rate of Return Boom 0.60 23% Normal 0.25 15% Recession 0.15 -7% C. If the beta of this portfolio is 1.5, the risk-free rate of return is 6.5%, how much is the risk premium applied in calculating the systematic risk of this portfolio using the Capital Asset Pricing Model (CAPM)? (1 mark)