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# Part A

Here we are taking the B as actual amount of borrowing after deducting the existing balance of \$
4000. Because bank requires depositing 20% of loan into current bank balance. So the amount of
borrowing will be higher than needed amount of \$24000.
So that

\$240000\$4000
B=
10.2

= \$ 295000

## So the \$ 295000 should be borrowed.

Interest rate will be charged at 3+1= 4%.
Interest amount payable on the loan:

## Interest = Principal x Rate x Time

= \$ 295000 x 0.04 x 3/12
= \$ 2950
So annual rate of interest on amount borrowed:

Intrest 1
APR = x
Principal Time
\$ 2950 1
= x
\$ 240000 3/12

= 0.04916
= 4.92 %

Here we are taking the B as actual amount of borrowing after deducting the existing balance of
\$ 4000. Because bank requires depositing 20% of loan into current bank balance. In this option
bank will charge 3 % interest rate but bank will deduct the interest from loan amount of
borrowing, so the amount should be equal to \$ 240000.

So,

## B 0.2B + \$ 4000 = \$ 240000

\$ 240000\$ 4000
B= 3
10.20.03 x 12

= \$ 297791.80
Interest = Principal x Rate x Time
= \$ 297791.80 x 0.03 x 3/12
= \$ 2233.44
Intrest 1
APR = x
Principal Time

\$ 2233.44 1
= x
\$ 240000 3/12

= 0.03722
= 3.72 %
In option (b) the interest rate is lower than the option (a) so I will accept the option B.
Part B
Given Information

## SHARE PERCENTAGE BETA EXPECTE

OF PORTFOLIO D RETURN
HARVEY NORMAN HOLDINGS 20% 1.00 16%
LIMITED
NATIONAL AUSTRALIA BANK LTD 30% 0.85 14%
QANTAS AIRWAYS LIMITED 15% 1.20 20%
ORIGIN ENERGY LTD 25% 0.60 12%
BHP BILLITON LIMITED 10% 1.60 24%

Expected Return on Portfolio:

## EP = (w1 x r1) + (w2 x r2)+ (wn x rn)

W1 = Percentage investment 1in Portfolio
r1 = Expected Return of Investment 1

(0.10x0.24)
=0.158
=15.8
Portfolio Beta:

## = (w1 x 1) + (w2 x 2)+ (wn x n)

W1 = Percentage investment 1in Portfolio
2 = Beta of investment 1

+ (0.10x1.60)
=0.945
=0.95