Suppose I have the following portfolio:
Security Amount invested Expected returns Beta
Share A $1,000 8% 0.80
Share B $2,000 12% 0.95
Share C $3,000 15% 1.10
Share D $4,000 18% 1.40
1. Comment on the level of risk and return on the portfolio in comparison to the market(include an explanation of what beta represents and the risk-return trade-off)
2. The capital asset pricing model(CAPM) is conceptually attractive because of its simplicity. Discuss the advantages and disadvantages of CAPM.