1. The opportunity cost of a project is 25%. What is the risk free rate of the project if the risk premium is 5% and has a beta of 3%? (5 Marks)
2. FEM Ltd is considering the following investment. The current rate of T-Bills is 15% and the expected return of the market is 24%. Using CAPM, what rate of return should FEM Ltd require for each of the following securities

3. Stock	Beta
   A	0.85
   B	1.56
   C	0.73
   D	1.42
   E	0.5

4. Assume we own two stocks, assets A and B. We have invested 10,000 in asset A and 6,000 in asset B. The return on asset A is 25% whilst that of B is 15%. The standard deviation of asset A is 12% and that of B is 8%. a. What is the expected return on the portfolio? (5 Marks) b. If the correlation between the two assets is 0.8. Calculate the risk of the portfolio. (5 Marks)
5. A) What is Risk Reduction, how related is this to diversification and under what condition is risk reduction possible? (5 Marks) B) what is systematic risk, how is it measured and give 5 examples of it? (5 Marks) C) How different is standard deviation from Beta of a security? (5 Marks)