You are considering investment in the shares of the following two companies. Company X Company...
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You are considering investment in the shares of the following two companies. Company X Company Y Beta Coefficient 1.20 0.80 Estimated Rate of Return 12.80% p.a. 13.20% pa. The risk free rate (Re) is 5% per annum and the expected return on the market (E(R.)) is12% per annum. a) What does the Beta Coefficient measure? (2 Marks) Click or tap here to enter text. b) What can you say about the systematic risk of Company X and Company Yin relation to each other and relative to the market? (2 Marks) Click or tap here to enter text. c) Calculate the required rate of return that you must earn from Company A and Company B to compensate you for bearing the level of risk as measured by Beta? (4 Marks) Click or tap here to enter text. d) Is it possible for you to construct an efficient portfolio that has a higher expected return than the market portfolio and if so explain how you would achieve this? (2 marks) Click or tap here to enter text
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