SECTION B: MEDIUM ANSWER QUESTIONS

TASK $3$

$12$ MARKS

Nqabayerulu fert Lod is diversifying its operations and busineas growth strategy and have decided to invest in some shares listed in the Johmonesurg Exchange. Below is the data available for $4$ shares from which the company can irrest in$.$

$\backslash$table$[[$Share$,$Actual Return,Beta$],[$Jampak$,18\%,1\mathrm{.}3],[$Colder$,13\mathrm{.}2\%,0\mathrm{.}8],[$Moon Pak,$16\mathrm{.}5\%,1\mathrm{.}1]]$

The risk$-$free rate is $10\%$ and the expected return on the market portfolio is $15\%$

Required:

$3\mathrm{.}1.$ Calculate the expected retum on each of the shares of the Shares and namo the shares Nqabayezulu can invest in and those not suitable. Give reason for your answer. $($B$)$

$3\mathrm{.}2$ Determine which of the above $4$ shares are undervalued and overvalued. $(4)$

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$4\mathrm{.}1$ Determine which of the above $4$ shares are undervalued and overvalued. $(8)$