Currently the rate of return of the risk-free government bond is 3% while the expected rate of return on the market is 11%. Using CAPM, calculate the rate of return required for A plc who has a beta of 0.8 and B plc who has a beta of 1.35. If you create a portfolio with 40% of funds in A plc and 60% in B what return would you expect?

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A: Risk free rate=6%Rate of return with beta 1=13.0%Dividend next=$9Price=$105

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A: According to CAPM model: rate of return =risk free rate+beta ×market return - risk free rate

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Portfolio Management

Portfolio management is the process by which an investor decides that how the person will invest in a variety of assets in order to get a desired return in the future. A portfolio means a pool of assets that includes securities, bonds, and other investment instruments which helps in risk minimization of the money that has been invested. In other words, it can be said that a portfolio means a combination of assets in which an investor decides to invest their money in order to get a lump sum return in the future or even a series of cash flow that the person is expecting at the end of their job life.