Question 4 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 5%. Share Stock Expected Price (P.) Return Dividend Yield (D/P.) 5.2% Plowback ratio CAPM beta B D $24.50 $100 $72 12.7% 9.2% 19% 50% 40% 20% 60% Earnings growth ROE rate 7.5% 5% 12.5% 4% 20% 15% 1.1% 0.6 2.0 0.3 $44 (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 A? Explain any assumptions you need to make. (4 marks) (c) Determine the dividend yield for Stock B. Explain any assumptions you need to make