Shares in M and N lie on the security market line.

a. What is the riskless rate of return and the risk premium on the market index portfolio?
b. Share P has an expected return of 30 per cent and a beta of 1.7. What is likely to happen to the price and return on shares in P?
c. Share Q has an expected return of 10 per cent and a beta of 0.8. What is likely to happen to the price and returns on a share in Q?

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Share M Share N Expected return 18% 22% 1.5 (assume the CAPM holds)