You are your Great Auntie Millies favourite niece. Uncle Frank recently died and she has asked you to help with her financial affairs. She recently heard that Christchurch Developers Ltd has some great projects in development and expects a return of 20%. She wants to liquidate her financial assets which have only been returning 12% and buy up as many Christchurch Developers shares as she can.

You are your Great Auntie Millie's favourite niece. Uncle Frank recently died and she has asked you to help with her financial affairs. She recently heard that Christchurch Developers Ltd has some great projects in development and expects a return of 20%. She wants to liquidate her financial assets which have only been returning 12% and buy up as many Christchurch Developers shares as she can. (a) What advice would you give her? Why is this your advice? Great Auntie Millie's investment advisor has given her the option of the following securities to add to her well-diversified portfolio. Information on these securities is provided below. The risk-free rate is 4% and the return on the market is 10%. Security Beta Expected Return ABC 0.6 7.8% DEF 0.8 9% GHI 1.2 11% Formulas are provided on the last pages of this question booklet. (b) Calculate the required returns for each of the securities and state (Yes or No) whether you would recommend that Aunt Millie should add that security to her portfolio and why that is your recommendation