In part (iii) of this question, they ask us to calculate the beta's of each asset. There are differing answers to the methods used. The first method is finding the covariances and then dividing by the market variance and the second method is using the security market line equation. If examined, which method should we use? Will it be specified in the question? And if so how will the question be framed so we can identify which method to follow.
In a market where CAPM genuinely holds then both methods will return the same values for the beta.s Unfortunately, the numerical values given in this question contradicted the CAPM and so resulted in two possible sets of solutions.
