Calculate expected rate of return for both and also the, Financial Management

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Calculate expected rate of return for both and also the

For Commonwealth Bank

Beta (β) =1.11

Market return (Rm) = 7%

Risk-free return (Rf) = 3.25%

For Rio-Tinto

Beta (β) =0.95

Market return (Rm) = 7%

Risk-free return (Rf) = 3.25%

Calculate expected rate of return for both and also the construct a portfolio made up of 60% CBA and 40% RIO.

Based on your understanding of the CAPM and the SML, which of these asset(s) or portfolio(s) would you invest in and which would you not invest in. Explain your choice .

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