You are thinking of investing in shares in ABC Ltd.  The ABC share price at the end of each of the last four years was as follow:

 

Year	Share Price	Return
2011	$3.45	-
2012	$3.95
2013	$4.25
2014	$4.00

 

You decide that your answer to part (a) above is the best estimate of the expected return on ABC Ltd shares over the next 12 months. You are considering investing in a portfolio of shares, including the ABC shares referred to above, as well as shares in DEF Ltd and GHI Ltd. You plan to invest 25% of your funds in ABC Ltd shares, 50% of your funds in DEF Ltd shares and the remainder in GHI Ltd shares.The expected return on DEF Ltd shares and GHI Ltd shares is shown in the following table, along with the beta of each of the three different shares.

	ABC Ltd	DEF Ltd	GHI Ltd
Expected Return		7.50%	9.10%
Beta	0.8	1.2	1.5

 

The risk‐free rate of return is 2.5%, and the expected return on the market is 9%.

1. What is the arithmetic average realised return over this period? (hint - fill in the table above first).
2. What is the geometric average realised return over this period? 
3. What is the expected return on the portfolio?
4. What is the beta of the portfolio? 
5. What is the expected return on the portfolio, according to the CAPM?