Question 2 The table below displays some valuation characteristics for four stocks. Answer the items below by assuming the CAPM holds, and the risk-free interest rate for borrowing and lending is 4% Stock Share Price (Po) $50 Expected Return Dividend Yield (D1/Po) 7% Plowback ratio ROE Earnings growth rate CAPM beta A 112% 30% 4.2% B 60% 10% 0.90 $75 $64 9.4% 8.5% 6% 6% 50% 12% 2.5% 1.75% 0.75 1.50 $32 45% (a) "If a portfolio has a CAPM beta of 1.0, then its realised return must be the same as that of the market portfolio" True/false? Explain (You will be marked on the explanation(s) provided) (4 marks) (b) What is the ROE for Stock A2 Explain any assumptions you need to make (4 marks)