Portfolio Theory and

The Capital Asset Pricing Model (CAPM)

Chapter 2 - Return & Risk (CAPM) 2

1. Expected return
2. Variance
3. Standard Deviation
4. Covariance
5. Correlation

Chapter 2 - Return & Risk (CAPM) 3

1. Expected earnings that the investment would
generate, in terms of cash flows.
2. The actual return may be either higher or lower.
3. It may be based on a detailed analysis of a firm’s
prospects, on some computer-based model, or on
special (inside) information.
4. It is also called mean return or average return
5. (Ř) = A total of average return where:
P – probability
% - rate of return stock A in each state of economy
(Ř stock A) = P(%) + P(%) + P(%)

Chapter 2 - Return & Risk (CAPM) 4

a. Variance – squared deviation of a security’s
return from its expected return
Variance (σ2) =P (RA – ŘA)2
a. Standard deviation – square root of variance
b. SD =√ VARIANCE OR √ σ2
c. Assess volatility (variability) of a security’s
return from its expected return

Chapter 2 - Return & Risk (CAPM) 5

a. Measure interrelationship between two
securities. The average values of the states of economy.
Covariance (σAB) = P(RA-ŘA)(RB –ŘB)
To determine whether the return on
individual security is related to one another.
b. Correlation (ρAB) = Covariance / (SDA) (SDB)
ρ AB = σAB
√ σA x √ σB
2 2

Chapter 2 - Return & Risk (CAPM) 6

 Consider the
following two Economic Probability Super Slow
companies: Super Condition (A)
and Slow, the
(B)
return of Super is Depression 0.25 -20% 5%
expected to follow
the economy Recession 0.25 10% 20%
closely whereas
Slow’s return do Normal 0.25 30% -12%
not follow the
economy. The Boom 0.25 50% 9%
return predictions
for the two
companies are as
follows:

Chapter 2 - Return & Risk (CAPM) 7

 Řsuper = 0.25(-0.20) + 0.25(0.10) + 0.25(0.30)
+ 0.25(0.50)
= 0.175 =17.5%
 Řslow = 0.25(0.05) + 0.25(0.20) + 0.25(-0.12)

+ 0.25(0.09)
= 0.055 =5.5%

Chapter 2 - Return & Risk (CAPM) 8

 Rsuper Řsuper Variance=P (RA – ŘA)2
(A) (A)
Depression -0.20 0.175 0.25(-0.20 – 0.175)2 = 0.03515625

Recession 0.10 0.175 0.25(0.10 – 0.175)2 = 0.00140625

Normal 0.30 0.175 0.25(0.30 – 0.175)2 = 0.00390625

Boom 0.50 0.175 0.25(0.50 – 0.175)2 = 0.02640625

Variance Total = 0.066875

(σ2)
Standard Deviation √ σ = √ 0.066875 = 0.2586 =25.86%
Chapter 2 - Return & Risk (CAPM) 9
 Rslow Řslow Variance=P (RB – ŘB)2

Depression 0.05 0.055 0.25(0.05- 0.055)2 = 0.00000625

Recession 0.20 0.055 0.25 (.20- 0.055)2 = 0.00525625

Normal -0.12 0.055 0.25 (-0.12-0.055)2 = 0.00765625

Boom 0.09 0.055 0.25(0.09 – 0.055)2 = 0.00030625

Variance Total = 0.013225

(σ2)
Standard Deviation √ σ = √ 0.013225 = 0.115 =11.5%
Chapter 2 - Return & Risk (CAPM) 10
 Covariance (σAB )

Super Slow Covariance =

(RA –ŘA) (RB –ŘB) P(RA-ŘA)(RB –ŘB)
Depression -0.2 -0.175 0.05 -0.055 (0.25)(-0.375)(-0.005)
= 0.00046875
Recession 0.10-0.175 0.20-0.055 (0.25)(-0.075)(0.145)
= -0.00271875
Normal 0.30-0.175 -0.12-0.055 (0.25)(0.125)(-0.175)
= -0.00546875
Boom 0.50-0.175 0.09-0.055 (0.25)(0.325)(0.035)
= 0.00284375
•
Correlation (ρAB ) = cov/sd Total: -0.004875
ρ AB = σAB / σA x σB = -0.004875/ 0.2586 x 0.115 = -0.1639
Chapter 2 - Return & Risk (CAPM) 11
 Covariance (σAB = cov (RA,RB) is made up of both:
 Correlation between 2 securities
 Variability of each of the securities
 σAB = P(RA-ŘA)(RB –ŘB) or

 σAB = ρAB x σA x σB
 Correlation (ρ
AB or corr (RA,RB)
 Covariance / Standard deviation
ρAB = σAB / σA x σB
Chapter 2 - Return & Risk (CAPM) 12
1. A negative covariance implies that the return on one
stock is likely to be above its average when the
return on the other stock is below its average, and
vice versa. (example: air asia vs petronas)
2. A positive covariance implies that the return on one
stock is generally above the average when the return
on the other stock is also above the average , and
vice versa. (example: air asia vs mas)
3. A zero covariance implies that there is no
relationship between the returns. (example: air asia vs digi)

Chapter 2 - Return & Risk (CAPM) 13

3. Correlation must always be between +1 and -1.
It can also be 0
a) +1: perfectly positive correlated
b) -1: perfectly negative correlated
c) 0: uncorrelated or zero correlated
d) 0<ρ <1 : positively correlated
e) -1 <ρ <0 : negatively correlated

(Look at figure 2.1 page 31)

Chapter 2 - Return & Risk (CAPM) 14

 General Motors & Ford
 General Motors & IBM

- Correlation for the 1st pair is much higher than

correlation for 2nd pair

- Therefore, the 1st pair is more inter-related than the

2nd pair
- This is because the 1st pair are in the same industry

Chapter 2 - Return & Risk (CAPM) 15

 Both the returns of A
and B are higher than Return
average at the same
time. Both the returns
on A and B are lower B
than average at the same A

time
Time

Chapter 2 - Return & Risk (CAPM) 16

 The return of A is higher than average when the return of B is
below the average and vice versa.

Return
A

Time

Chapter 2 - Return & Risk (CAPM) 17

 The return of A is completely unrelated to the return
of B

Return

Time

Chapter 2 - Return & Risk (CAPM) 18

  Weighted average of the expected returns
on the individual securities

A B
Expected return 0.175 0.055
Standard Deviation 0.2586 0.115
Weightage 60% 40%
Covariance =-0.004875
Correlation = -0.1639

Chapter 2 - Return & Risk (CAPM) 19

 ŘP = X A Ř A + X B Ř B
where XA and XB are the proportions (%) of the total
portfolio in the assets A and B respectively.
XA + XB must equal 100%.

ŘP = (0.60)(0.175) + (0.40)(0.055)
= 0.127

Chapter 2 - Return & Risk (CAPM) 20

1. The variance of a portfolio depends on both:
 The variance of individual security; measures variability represented by XA2σA2
 The covariance between the 2 securities; measures relationship by 2XAXBσAB

2. Variance portfolio:
σ2 = X 2
PA A
σ 2
+ 2X X σ
A B AB + X 2
B Bσ 2

3. Standard deviation portfolio = √ σ2 P

= (0.6)2 (0.2586)2 + 2(0.6)(0.4)(-0.004875) + (0.4)2(0.1150)2

= 0.024074625 + (-0.00234) + 0.002116
σ2 P = 0.023850625
σ P = √ 0.023850625
= 0.154436475 =15.44%

Chapter 2 - Return & Risk (CAPM) 21

 Stock A Stock B
 2 assets case
Stock A XA2 σA2 XA XB σAB
= (0.6)2 (0.2586)2 = (0.6)(0.4)(-0.004875)
(AA) (AB)
Stock B XA XB σAB XB2 σB2
=(0.6)(0.4)(-0.004875) = (0.4)2 (0.1150)2
•Many assets (BA) (BB)
case
1 2 3 N

1 X12σ12 X1 X2σ12 X1 X3σ13 X1 XN σ1N

2 X2 X1σ21 X22σ22 X2X3σ23 X2 XN σ2N
3 X3 X1σ31 X3 X2σ32 X32σ32 X3 XN σ3N
N XNX1 σN1 XN X2σN2 XN X3σN3 XN2 σN2

Chapter 2 - Return & Risk (CAPM) 22

 From the above matrix, variance of a portfolio is arrived by
adding up the terms in these 4 boxes. The box (AA) and (BB)
contain variances of A and B, whereas box (AB) and (BA)
contain covariances between the two.
i. The diagonal terms represents the variances of the different
securities, which is equal to the number of securities in the
portfolio
ii. The off-diagonal terms contain the covariance. The number
increases much faster than the number in the diagonal terms.

 Conclusion: The variance of the return on a portfolio with many securities

is more dependent on the covariance between the individual securities than
on the variances of the individual securities

Chapter 2 - Return & Risk (CAPM) 23

1) Compare the standard deviation of a portfolio
and the weighted average of standard deviation
of individual securities.
2) Weighted average of standard deviation of
individual securities = XAσA + XBσB
= (0.6)(0.2586) + (0.4)(0.115) = 20.12%
3) However, SD of portfolio (15.44%) is lower than
the weighted average of standard deviation of
individual securities (20.12%). Therefore
diversification takes effect
4) Diversification effect applies as long as there is
less than perfect correlation (ρ < 1)

Chapter 2 - Return & Risk (CAPM) 24

5) A positive covariance between 2 securities would
increase the variance of the entire portfolio. If both
the securities increases and decreases together at the
same time, then the risk of the portfolio will be larger.
No hedging.
6) A negative covariance would decrease the variance
of the portfolio. This means that if one security tends
to go up when the other goes down, or vice versa, the
securities are off-setting each other. This is called
Hedging. The risk of the entire portfolio will be
reduced.
7) If both securities increase and decrease together, the
risk of the entire portfolio will be higher.

Chapter 2 - Return & Risk (CAPM) 25

1. Diversification can substantially reduce risk
without an equivalent reduction in expected
returns.
2. Risk is reduced due to lower expected return
of one asset is offset by a higher expected
return from another asset. However, a
minimum level of risk will remain i.e. the
systematic portion.

Chapter 2 - Return & Risk (CAPM) 26

1. Systematic Risk – Uncontrollable Factors
1. Risk factors that affect a large number of assets
2. Also known as market risk or non-diversifiable risk
3. Includes changes in GDP, inflation, interest rates etc.
4. Cannot be eliminated.

2. Unsystematic risk –Controllable Factors

1. Risk factors that affect a limited number of assets
2. Also known as diversifiable risk or unique risk and asset-
specific risk
3. Include labor strikes, part shortage.
4. Can be eliminated by combining assets into a portfolio

Chapter 2 - Return & Risk (CAPM) 27

3. Total risk = Systematic risk + Unsystematic risk

1. To measure total risk, we use the standard

deviation
2. Unsystematic risk is very small for a well
diversified portfolio.

Chapter 2 - Return & Risk (CAPM) 28

σ

Total Risk (σ)

Unsystematic Risk

Systematic Risk
number of assets

Chapter 2 - Return & Risk (CAPM) 29

 SeeExamples 2.3, 2.4 and 2.5
(page 37 – 41)

Chapter 2 - Return & Risk (CAPM) 30

 Super Slow PORTFOLIO
Current 60% 40%
R 17.5% 5.5% 12.7%
σ 25.86% 11.5% 15.44%
50% 50% 0.5(17.5) + 0.5(5.5) = 11.5%
R √0.52 (25.86)2 + 2(0.5)(0.5)(-48.75) + 0.52 (11.5)2
σ = 13.26%
10% 90% 0.10(17.5) + 0.9(5.50) = 6.7%
R √0.1 2(25.86)2 + 2(0.1)(0.9)(-48.75) + 0.9 2 (11.5)2
σ = 10.25%
90% 10% 0.9 (17.5) + 0.1 (5.5) = 16.3%
R √ 0.92 (25.86)2 + 2 (0.9) (0.1) (48.75) + 0.12 (11.5)2
σ = 23.11%
100% 0%
R 17.5%
σ 25.86%
Chapter 2 - Return & Risk (CAPM) 31
 Ř
60% Super, 40% Slow Super
3
17.50
2
“efficient set”

MV
“feasible set”

1 1”

5.50
Slow

11.50 25.86
σ

Chapter 2 - Return & Risk (CAPM) 32

1) Point MV: portfolio with the lowest standard deviation
(minimum variance portfolio)
2) The curve from Slow to Super is called “feasible set” or
“opportunity set”
3) The curve from MV to Super is called “efficient frontier”/
“efficient set”. All portfolios are efficient portfolio on the
efficient set.
4) Point 1 and 1” have the same return but 1” has higher risk.
5) The line between Super and Slow has correlation coefficient
of 1 which implies no diversification.
6) A rational investor will only choose points from MV to
Super. No one would want to hold a portfolio below MV.
7) A risk averse investor would prefer to choose points closer
to MV, for e.g. point 2, and an investor relatively tolerant of
risk (risk taker) would choose points closer to Super, for e.g.
point 3.
Chapter 2 - Return & Risk (CAPM) 33
8) The larger the negative correlation coefficient, the more backward
bending the curve will be. The greatest bend will occur to -1.
9) Risk reduction can be achieved by adding a new security to the
portfolio, provided that the returns on the new security are not
perfectly positive correlated with the returns of the existing portfolio.

Ř
Ρ = -1 Ρ = 0.5

Ρ=1

Ρ = -0.5

Chapter 2 - Return & Risk (CAPM) 34

a. When investors hold more than 2 securities, the feasible
set would no longer be a line, instead it would be a
confined region.
Ř A
R
2
w
MV 1
3

Chapter 2 - Return & Risk (CAPM) 35

b) The shaded area represents all possible combination of
expected returns and standard deviations for a portfolio. E.g.
Pt.1 may represent a portfolio of 40 securities, Pt.2 a portfolio
of 80 securities and Pt3 might represent a different set of 80
securities or the same securities held in different proportion.
c) An individual will want to be somewhere on the upper edge
between MV and A.
d) No individual would choose any point below the efficient set
e) Efficient portfolios are:
a) Portfolios that will offer the highest expected return for a
given standard deviation, or
b) For a given expected return, these portfolios will offer the
lowest risk.

Chapter 2 - Return & Risk (CAPM) 36

A. In a large portfolio, the variance terms (unsystematic risk)
are effectively diversified away, but the covariance terms
are not (the element of systematic risk remain). Thus
diversification can eliminate some, but not all of the risk of
individual securities.
B. Since rational investors will only hold a well-diversified
portfolio, the standard deviation of his portfolio is less than
the average standard deviation of the individual securities.
For this investor, diversification eliminates part of the risk
of an individual security. The only relevant risk is the
security’s contribution towards the risk of an entire well-
diversified portfolio.

Chapter 2 - Return & Risk (CAPM) 37

a) An investor can combine a risky investment with a
risk-free investment in the opportunity set.
b) In a 2-asset case (1 risky and 1 risk-free asset),
variance of the portfolio will be XA2 σA2
c) Risk-free securities have zero standard deviation
and zero covariance.
d) Řp = XAŘA + XFŘF

Chapter 2 - Return & Risk (CAPM) 38

 Ms Rina is considering investing in the common
stock of Mutiara Enterprise. In addition, Ms Rina
will either borrow or lend at the risk-free rate. She
chooses to invest a total of RM1,000, of which
RM350 (35%) is to be invested in Mutiara Ent. and
RM650 (65%) in a risk-free asset.

Mutiara Risk-free Asset

Expected return 14% 10%

Standard deviation 20% 0%

Chapter 2 - Return & Risk (CAPM) 39

 ŘP = XMRM + XFRF
= 0.35(14) + (0.65)(10)
= 11.4%
 σ2P = XM2 σM 2 +2XMXF σMF + XF2 σF 2
= X2M σ 2M
= (0.35)2 (20%)2 (SD risk free = 0%), so just calculate
the risky asset
= √ 49

σp = 7%

Chapter 2 - Return & Risk (CAPM) 40

 Ms Rina borrows RM200 at the risk-free rate.
Combined with her original sum of RM1,000, she
invests a total of RM1,200 in Mutiara.
 Expected return on her portfolio:

Ř = X M RM + X F R F
P
= RM1,200* x 14% + (- RM200*) x 10%
RM1,000 RM1,000
= 14.8%
* Rina invest 120% of her original investment of RM1,000 by borrowing 20% of her
original investment at a risk free rate expected return (10%) to invest in a risky
investment.

Chapter 2 - Return & Risk (CAPM) 41

I. The relationship between the expected return and
risk for one risky asset and one risk-free asset is a
straight line
II. If the investor borrows at a higher borrowing rate,
this will lower the expected return on the
investment and vice versa.

e.g Rina borrow at 10% risk free rate of return (lower lending
rate) to invest in a 14% return for risky security, Rina
would expect greater return 14.8% (higher expected
return).

Chapter 2 - Return & Risk (CAPM) 42

 Ř
(120% in M, 20%
in Rf)

14%
M
Borrowing to invest in M
B (35% in M, when the borrowing rate is
10% = Rf 65% in RF) greater than the lending rate
lead to lower expected return

Chapter 2 - Return & Risk (CAPM) 43

 1. Q represents a portfolio
LINE 2 of securities. It is in the
Ř 5
Y interior of the feasible set
A of risky assets.
Individuals combining
4 Q 3 investments in Q with
LINE 1
2 investment in the risk-
Rf free assets would achieve
1 X points along the straight
line from Rf to Q.
σ

2. Though many investors can choose any point on line 1, no point on the line is
optimal. To see this, consider line 2. This line represents portfolio formed by
combination of Rf assets and securities in A. Line 2 is tangent to efficient set of
risky assets. Whatever points an individual can obtain on line 1, he can obtain a
point with the same SD and a higher ER on line 2. Since this line is tangent to the
efficient set of risky assets, it provides the investor with the best possible
opportunity. With risk-free borrowing and lending, the portfolio of risky assets
held would always be point A.

Chapter 2 - Return & Risk (CAPM) 44

1. It is unrealistic to assume that investors can borrow at the
risk-free rate. Individuals and companies are not risk-free
and will therefore not be able to borrow at the RF rate. They
will be charged a premium to reflect their higher level of
risk.
2. There are problems associated with identifying the market
portfolio, that requires knowledge of the risk and return of
all risky investments and their corresponding correlation
coefficient.
3. To identify the market portfolio especially for small
investors, it is expensive when consider from a transaction
cost point of view – need to hire professional/expert.
4. The market portfolio will change over time. This will be
due, both to shifts in the RF rate of return and in the feasible
sets and hence in the efficient frontier.

Chapter 2 - Return & Risk (CAPM) 45

1. Assuming in a world where investors have access to
similar sources of information, then they would have
the same expected returns, variances and covariance.
This assumption is called homogeneous expectation
2. If all investors had homogeneous expectation, they
would sketch out the same efficient set of risky assets
which is represented by the curve XAY.
3. Since the same Rf rate would apply to everyone, all
investors would view point A as the portfolio of risky
asset to hold
4. If all investors choose the same portfolio of risky
assets, that portfolio is the market portfolio which is
also a diversified portfolio.

Chapter 2 - Return & Risk (CAPM) 46

1. The best measure of the risk of a security in a large
and diversified portfolio is the beta of the security.
This is because, in a large and diversified portfolio,
the only risk which is still left is the systematic risk
(risk due to uncontrollable factors) and there is no more
unsystematic risk (risk due to controllable factors) . Therefore,
only systematic risk is relevant in a large portfolio.
2. The unsystematic risk is now equal to zero and
becomes irrelevant.
3. Since beta measures systematic risk, beta is the best
measure of risk of a security in a diversified
portfolio.
Chapter 2 - Return & Risk (CAPM) 47
a. Measures the responsiveness of a return of security to
movements in the return of market portfolio.
b. Βi = Cov (i,m) = covariance between return asset i and m
σ2(m) variance or [SD of market (square)]
c. If beta =1, it implies that the change in return of the
company moves in the same % as the market portfolio
d. If beta = 0.5, the stock is ½ as volatile as the market. It
means that the return rises and falls only ½ as much as the
market
e. If beta =2, the stock is twice as volatile as an average stock
market. This means that the stock will be twice as risky as
an average portfolio.
f. Most stocks have betas in the range of 0.75 to 1.50 and the
average for all stocks is 1.0 by definition. (refer table 2.7 page 60)

Chapter 2 - Return & Risk (CAPM) 48

1) A portfolio consisting of low-beta securities will itself
have a low beta, as the beta of any set of securities is the
weighted average of the individual securities’ beta.
N

Therefore, Portfolio Beta = ∑ X i βi

i=1

2) If a high beta is added to an average risk portfolio, then

the beta and the risk of the portfolio will increase
3) If a low beta stock is added to an average risk portfolio,
the portfolio’s beta will decrease
4) Since a stock’s beta measures its contribution to the
riskiness of a portfolio, beta is the appropriate measure
of the stock’s riskiness.
Chapter 2 - Return & Risk (CAPM) 49
1. An investor holds a RM100,000 portfolio
consisting of RM10,000 invested in each of 10
stocks. Each stock has a beta of 0.8. Therefore, his
portfolio would have a beta of 0.8, which is less
risky than the market.
2. Suppose he sells one of the existing stocks and
replace it with a stock having a beta of 2. Therefore,
his portfolio’s beta is equal to 0.9*(0.8) + 0.1*(2)
= 0.92 (existing *90,000/100,000=0.9, sells 10,000/100,000=0.1)
1. If he replaced it with stock having a beta of 0.6,
therefore, his portfolio’s beta = 0.9(0.8) + 0.1(0.6)
= 0.78

Chapter 2 - Return & Risk (CAPM) 50

i. CAPM explains the relationship between risk and required
return of an asset when they are held either in a well
diversified portfolio as well as for individual securities.
ii. Expected return of assets should be positively related to its
risk. That is, an individual will hold a risky asset only if its
expected return compensated for its risk.
iii. Expected Return on Market:
ŘM = RF + Market Risk Premium
iv. Expected Return on an individual security:
Ři = RF + βi (RM –RF)

Chapter 2 - Return & Risk (CAPM) 51

1. Explains the relationship between systematic risk (β) and
expected return
2. Also the relationship between risk and return on individual
securities.
Ri Security Market Line (SML)

Undervalued stock SML

M
RM Ři = RF + βi (RM – RF)
(2)
1. The expected return on a stock with a beta
of 0 is equal to the risk-free rate
RF
Overvalued stock 2. The expected return on a stock with a beta
(1) of 1 is equal to the expected return on the
market
β
1.0

Chapter 2 - Return & Risk (CAPM) 52

1. Investors are risk averse (low risk takers)
2. There exist perfect competition – individual
investors are price takers
3. Securities are completely divisible
4. Investments are limited to traded financial
assets
5. No taxes or transaction costs are involved
6. Investors are rational
7. Investors have homogenous expectation (have
access to similar information)

Chapter 2 - Return & Risk (CAPM) 53

8. Risk-free assets are available
9. Investors have access to all investments and
also to unlimited borrowings and lending
opportunity at the risk-free rate.
10. Investors maximize expected utility of the
portfolio over a single period planning
horizon

Chapter 2 - Return & Risk (CAPM) 54

1. Linearity: Since beta is an appropriate measure of risk,
high-beta securities should have an expected return above
that of low-beta securities. The relationship between
expected return and beta corresponds to a straight line.
2. Portfolios as well as securities: The relationship between
risk and expected return as shown in SML equation holds
for portfolios as well as individual securities
Example: Stock A has a beta of 1.5 and stock Z, a beta of
0.7. The Rf is 3% and risk premium is 8%.
The required returns on two securities are:
RA = 3% + 1.5(8%) = 15%;
RZ = 3% + 0.7(8%) = 8.6%
Chapter 2 - Return & Risk (CAPM) 55
 If we form a portfolio by investing equally in A and Z, the
expected return on the portfolio = 0.5(15%) + 0.5(8.6%) =
11.8%
Using CAPM; beta return of portfolio and expected return on portfolio
βP = 0.5(1.5) + 0.5(0.7) = 1.1
Rp = 3% + 1.1 (8%) = 11.8%
3. A potential confusion: Students often confuse the SML (figure 2.11
page 63) with Line II (Capital Market Line - CML) (figure 2.9 page 56).
Actually they are quite different. The differences between the two are:
Line II (F2.9): This line traces the efficient set of portfolios formed
from both risky assets and riskless asset. Each point on the line
represents an entire portfolio. Individual securities do not lie along line
II. Line II holds only for efficient portfolio.
SML (F2.11): this line relates expected return to beta. SML holds both
for all individual securities and for all possible portfolios

Chapter 2 - Return & Risk (CAPM) 56

 Referto examples 2.9, 2.10,
2.11, 2.12, 2.13
(page 64 – 71)

Chapter 2 - Return & Risk (CAPM) 57

 Text book Questions and Problems:
 Q17,18,23,28,29,32,33,35,37

 PYQs

Chapter 2 - Return & Risk (CAPM) 58

Sources was adapted from:
•Ross, Westerfield, Jaffe, Rodziah, Shelia, (2016) Corporate Finance (2 nd. Ed),
McGraw Hill.
•Rodziah Abd Samad, Shelia Christabel, Mohd. Nizal Haniff, (2013) Financial
Management for Beginners, (4th Edition) McGraw-Hill.
•ACCA F9 Financial Management Study Text 2016

59