FIN2601 Assignment 1 (COMPLETE ANSWERS) Semester 1 2026 (792539) - DUE 19 April 2026 ;100% trusted ,comprehensive and complete reliable solution with clear explanation

, FIN2601 Assignment 1 (COMPLETE ANSWERS) Semester 1 2026
(792539) - DUE 19 April 2026 ;100% trusted ,comprehensive and
complete reliable solution with clear explanation




Question 1.1 Expected return of the market portfolio (6 marks)

𝐸𝑥𝑝𝑒𝑐𝑡𝑒𝑑 𝑟𝑒𝑡𝑢𝑟𝑛 = 𝛴 (𝑃𝑟𝑜𝑏𝑎𝑏𝑖𝑙𝑖𝑡𝑦 × 𝑀𝑎𝑟𝑘𝑒𝑡 𝑟𝑒𝑡𝑢𝑟𝑛)

𝐸(𝑅𝑚) = (0.1 × 10%) + (0.2 × 12%) + (0.4 × 13%) + (0.2 × 16%)
+ (0.1 × 17%)𝐸(𝑅_𝑚)
= (0.1 × 10\%) + (0.2 × 12\%) + (0.4 × 13\%)
+ (0.2 × 16\%) + (0.1 × 17\%)𝐸(𝑅𝑚)
= (0.1 × 10%) + (0.2 × 12%) + (0.4 × 13%) + (0.2
× 16%) + (0.1 × 17%)

𝑆𝑡𝑒𝑝 𝑐𝑎𝑙𝑐𝑢𝑙𝑎𝑡𝑖𝑜𝑛𝑠:

 0.1 × 10% = 1.0%
 0.2 × 12% = 2.4%
 0.4 × 13% = 5.2%
 0.2 × 16% = 3.2%
 0.1 × 17% = 1.7%

𝐸(𝑅𝑚) = 1.0 + 2.4 + 5.2 + 3.2 + 1.7𝐸(𝑅_𝑚)
= 1.0 + 2.4 + 5.2 + 3.2 + 1.7𝐸(𝑅𝑚)
= 1.0 + 2.4 + 5.2 + 3.2 + 1.7 𝐸(𝑅𝑚) = 13.5%𝐸(𝑅_𝑚)
= 13.5\%𝐸(𝑅𝑚) = 13.5%

✅ 𝑬𝒙𝒑𝒆𝒄𝒕𝒆𝒅 𝒎𝒂𝒓𝒌𝒆𝒕 𝒓𝒆𝒕𝒖𝒓𝒏 = 𝟏𝟑. 𝟓%


Question 1.2 Portfolio beta (10 marks)