DUE 16 APRIL 2026
Question 1 Transportation Hero is a diversified logistics and transportation holding
company that operates through several subsidiaries offering services across the
logistics value chain. The group has invested a total capital amount of R500 million across
five subsidiaries
Probability Market return
0.1 10%
0.2 12%
0.4 13%
0.2 16%
0.1 17%
1.1 Expected Market Return
The expected market return is the probability-weighted average of the possible market
returns.
E(R_m) = Σ p_i × R_i
= (0.1 × 10%) + (0.2 × 12%) + (0.4 × 13%) + (0.2 × 16%) + (0.1 × 17%)
0.1 × 10% = 1.0%
0.2 × 12% = 2.4%
0.4 × 13% = 5.2%
0.2 × 16% = 3.2%
0.1 × 17% = 1.7%
Total = 1.0% + 2.4% + 5.2% + 3.2% + 1.7%
E(R_m) = 13.5%