You are given the following data which refers to the performance of the FTSE 100 and two companies over the last financial year.
FTSE 100 Index at the end of 20X4........................................5,447
FTSE 100 Index at the end of 20X5........................................5,905
Dividend yield on the FTSE 100 for 20X5................................4.55%
Current redemption yield for 7% Treasury bills...........................3.78%

Required:
(a) Using the data above, calculate whether or not a diversified investor with shareholdings in the two companies will be satisfied with the returns they are receiving.
(b) Critically discuss how useful you consider the analysis in part (a) to be when making portfolio management decisions.

Aardvark plc Bear plc 260p 307p Share price at 31 December 20X4 Share price at 31 December 20X5 Total dividend payment Equity beta 201p 224p 8p 9p 1.3 0.87