You are considering investing your money in two stocks (A and B). The risk-free interest rate amounts to 3%. The total return on the market portfolio is 10%.

Calculate the expected return on the following two shares with specified beta values (Show calculation)

Share Beta Expected return

A 0.3

B 1.2

b) You form a portfolio of shares A and B. Assume that you weight the proportion of the shares in the portfolio (A = 7% and B = 30%). Calculate the total return on the portfolio. (Show calculation)