QUESTION $2[30$ MARKS$]$

$($a$)$ Calculate the expected return on Franky Ltd using the Capital Asset Pricing Model

$($CAPM$),$ if the return on short$-$term government bonds is $5\%,$ while the expected

rate of return of the market, with a beta measure of $0\mathrm{.}9,$ is $14\%.$

$($b$)$ Show and interpret the result of the expected rate of return on the stock if $$

changes to $1\mathrm{.}5.$