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IESTION ONE Masatu is a business man whose businesses are located in Dar es Salaam city centre. For a long period, Masatu has been hearing about capital market and has even attended some of the seminars on investing in capital market. Despite the vast information that Masatu has on operations of capital market, he has not yet invested in any of the products traded in the local stock exchange and the reason being lack of enough knowledge on choosing the profitable investments in the market. Recently, one of Masatu's friend who is a financial analyst advised Masatu to consider two shares which are traded in the local stock exchange that are considered to be more profitable. The following information on the shares were obtained: The financial analyst has indicated that Masatu should invest in both investments in order to optimize return and risk. The analyst calculated the co-efficient of correlation between the two shares which is +0.75 and has convinced Masatu to invest TZS. 1,200,000 in Alpha shares and TZS. 800,000 in Beta shares. The analyst has established that the return on government bond is 4% while the market has a return of 10% and risk of 6%. REQUIRED: (i) Estimate the expected return of each share and that of the proposed portfolio (8 marks) (ii) Estimate the beta of the portfolio (p) assuming that it is efficient according to the Capital Asset Pricing Model (CAPM). (3 marks) (iii) Comment on the portfolio beta (p) relative to the market portfolio (m). (2 marks)