Reference no: EM133072517

Problem: You are given a number of portfolios with their returns and risk.

1. Plot the feasible or attainable set represented by these data on a set of portfolio risk on x-axis and portfolio return on y-axis.
2. Draw the efficient frontier on the graph in 7(a).
3. Which portfolio lies on the efficient frontier and explain the reason why is these portfolios dominate the others in the feasible or attainable set?
4. Given an Arbitrage Pricing Theory (ABT) model with risk free rate of 9 percent; sensitivity to factor 1 and 2 are 0.8 and 5 respectively and risk factor 1 and 2 is 0.04 and 0.02, find the expected return of the security.
5. ABC company preference share par value is RM100. The shares had just been sold at the price of RM85. Find the ABC's cost of preference share if the dividend rate is 8 percent, payable every year.
6. Using the Gordon growth model which assumes that dividends grow at a constant rate forever, compute the value of a stock that pay a dividend of RM1 per share next year, if the expected growth rate of dividends is 6 percent and the shareholder require a return of 16 percent from their investment.