FIN630 Investment Analysis & Portfolio Management Assignments No.01 Solution and Discussion Fall 2013 ) Due Date: February 11, 2014

ASSIGNMENT QUESTION:

a) Two years data of ABC Company is given here. In 2012, beta for ABC 
Company was 1.2, RF was 0.05 and expected return in market was 0.12. In 2013, 
beta for this company was 0.8, RF was 0.04 and return in market was 0.12. 
You are required to calculate required rate of return in both years. What is major 
cause of the difference in both required rates of returns in your opinion? Justify 
your answer with some logical comments.
(12 marks) 
b) Assume that the expected return on portfolio A is 14%, with a standard 
deviation of 15% and RF is 5%. Find the slope of CML. What does it indicate?
(8 marks)