Question: (i) What does the CAPM allow you to calculate? Does it imply that a stock with a beta of zero will offer a zero expected

(i) What does the CAPM allow you to calculate? Does it imply that a stock with a beta of zero will offer a zero expected rate of return? Why? (5marks)

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(ii) Madison was recruited to design and decorate the offices of a large pharmaceutical company. While there, she accidentally read a report indicating that a new drug had just been approved by the Therapeutic Goods Administration. She immediately bought some of the company's shares which doubled in price over the following week. This outcome is inconsistent with which form of market efficiency and why?

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