Question: (2 x 5 marks = 10 Section - Long Answer Questions - Answer any TWO marks) 9. Shares in Liwa Chem (L. ) and Sur

(2 x 5 marks = 10 Section - Long Answer Questions - Answer any TWO marks) 9. Shares in Liwa Chem (L. ) and Sur Plastic (S) lle on the security market line Share (L) Share (S) Expected return 20% 25% Beta 1.3 1.8 (assume the CAPM holds) a. What is the riskless rate of return and the risk premium on the market index portfolio? (3 marks) b. Share of Al Ain Chemicals has an expected return of 19 per cent and a bota of 0.6. What is likely to happen to the price and return on shares in Al Ain Chemicals assuming the share has same riskless rate of return and risk premium as that of Land S. (2 marks)

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