Question

Your client is holding the following securities:

Sr. No.	Particulars of securities	Cost	Dividends/ Interests	Market price	Beta Risk factor
		Rs	Rs	Rs
A	Equity shares of Gold Ltd	10,000	1,725	9,800	0.6
	Equity shares of Silver Ltd	15,000	1,000	16,200	0.8
	Equity shares of Bronze Ltd	14,000	700	20,000	0.6
B	GOI bonds	36,000	3,600	34,500	1.0

Average return of the portfolio is 15.7 %. You are required to calculate:

1. Expected rate of returns of portfolio in each using Capital Asset Pricing Model(CAPM)
2. Risk free rate of return.

Answer 1