1. The risk free rate of interest is 10%, the rate of return on the market portfolio is 25% and you hold a portfolio of stocks worth £1000 that has a portfolio beta of 1.5 that is efficiently priced in line with the CAPM. If you borrow £1000 and invest it fully in the portfolio that you currently own then the expected rate of return on your capital is?
2. The risk free rate of interest is 4%, the return on the market portfolio is 10% and the standard deviation of the market return is 30%. If a combination of the risk free asset and the market portfolio has a standard deviation of 15%, the beta of the combined portfolio and expected rate of return is:
3. In determining the required rate of return on a security, the appropriate value of risk is its:
4. Security A has a beta of 0.5, the risk free rate of interest is 5% and the expected return on the market is 15%. If the security offers a prospective yield of 9% then according to the Capital Asset Pricing Model the security is:
5. Which of the following is NOT a characteristic of the Securities Market Line?