You are an investor keen to invest in the shares of Asjeet Ltd and Pinder Ltd. Your plan is to construct a portfolio consisting of a 30% investment in Asjeet Ltd shares and 70% in Pinder Ltd shares. You estimate that the current yield on a 10-year Government bond is 3% p.a. and plan to use this security as a proxy for the risk-free asset. You also estimate that the market risk premium is 6% p.a. You go on to compile the following information with a view to treating the ASX 200 index as a proxy for the market portfolio.

a) What is the standard deviation of returns for your portfolio (as a percentage to two decimal places e.g. 10.03%)?

b)What is the beta of Asjeet Ltd and Pinder Ltd shares (to two decimal places)?

c)According to the CAPM, what is the expected return for your portfolio (as a percentage

to two decimal places e.g. 10.03%)?

Asset Correlation coefficient (P1,2) Standard deviation of returns (p.a.) ASX 200 Pinder Ltd shares 10-year Government bond Asjeet Ltd shares Pinder Ltd shares ASX 200 index 10-year Government bond 20% 30% 25% 0 Asjeet Ltd shares 1.0 0.6 0.8 0 1.0 0.7 0 1.0 0 1.0