Question 8 In a market where CAPM holds there are 5 assets as follows: E A B 10 D E Probability of being in state Annual 2% 6% Return State 1 State 2 State 3 Market Capitalisation 2% 6% 9% 5m 2% 5% 8% 5m 2% 7% 6% 15m 1% 1% 1% N/A 0.33 0.17 0.5 7% 5m (i) Calculate the expected annual return on the market portfolio and Om, the standard deviation of the annual return on the market portfolio. (10 marks) (ii) Calculate the market price of risk under CAPM I (5 marks) Tatames