1. In terms of share investment define what beta () represents.[2.5 marks]
2. According to au.finance.yahoo.com, APT has a beta of 1.88.What does this mean?[2.5 marks]
3. In terms of riskiness how would you compare APT's beta to the market?[2.5 marks]
4. Calculate the expected returns for APT using the Capital Asset Pricing Model (CAPM) and the following yields.[5 marks]

• The risk free rate (Rf) as measured by the yield on Australian 10 year treasury bonds is 1.5% p.a.
• The average return on the market for the past 10 years has been 10.5% p.a.
• Use the APT beta () of 1.88.

1. i. Using the CAPM data from (d), create Excel scatter plot graph to plot the Security Market Line (SML)using the Rf, return on the market and APT.

 

ii. Based on your CAPM findings, construct a portfolio made up of 40% market and 60% APT. Calculate the estimated return and beta for this portfolio.

Answer rating: 100% (QA)

a Beta represents the systematic risk or market risk of a security relative to the overall market It ... View the full answer